The SundaeSwap protocol allows users to create liquidity pools, and by doing so earn trading fees as a form of yield or reward for providing the liquidity.
To create a new pool and become a liquidity provider on SundaeSwap, follow the steps below!
1. Visit the app.sundaeswap.finance, connect your wallet, and click on the "Home" tab via the navigation panel on the left.
2. On the right hand side, click the "Create Pool" button.
3. Select a pair of tokens to create the liquidity pool for. If you would like to create a pool for users to swap "ADA" for "MINT", or vice-versa, you would select those two tokens.
4. Enter the amount of tokens you would like to provide to create the liquidity pool. Unlike when you add liquidity, you have to enter amounts for both assets when creating a liquidity pool.
5. Once you’ve selected a pair of tokens, the next step is to select the right fee tier. Every pair of tokens offers three fee tiers:
0.05% fee tier: Best tier for stable pairs
The 0.05% fee tier is ideal for token pairs that typically trade at a fixed or highly correlated rate, such as stablecoin-stablecoin token pairs (e.g. DJED-USDC). LPs take on minimal price risk in these pools, and traders expect to pay minimal fees.
0.3% fee tier: Best for most pairs
The 0.30% fee tier is best suited for less correlated token pairs such as the ADA-DJED token pair, which are subject to significant price movements both to the upside and downside. This higher fee is more likely to compensate LPs for the greater price risk that they take on relative to stablecoin LPs.
1.0% fee tier: Best tier for exotic pairs
The 1.00% fee tier is designed for exotic assets, where LPs take on extreme price risk.
Here, we selected a 0.3% Fee tier for demonstration purposes only.
6. Review and order your deposit to create a new liquidity pool. Once created, you will receive LP tokens in your wallet, representing your share of the ownership of the liquidity pool.
Once the order is approved in your wallet, the pool will be created, and you can manage and track your new liquidity position in the "Liquidity" tab found on the navigation panel.