Liquidity Pools and Adding Liquidity

PancakeSwap Pools allow you to provide liquidty by adding your tokens to liquidty pools or "LPs".

When you add your token to a liquidty pool (LP), you will receive FLIP tokens (PancakeSwap's Version of liquidty provider tokens)

As an example, if you deposited $FRST and $BNB into a liquidity pool, you would receive FRST-BNB FLIP tokens.

The number of FLIP tokens you receive represents your portion your funds at any time by removing your liquidity.

Provinding liquidity is not without risk, as you may be exposed to impermanet loss.

"Simply put, impermanent loss is the difference between holding tokens in an AMM and holding them in your wallet." - Nate Hindman

It's not all about bad for liquidity providers as you will also be given a reward in a form of trading fees. Whenever someone trades FRST on PancakeSwap Pool, the trader pays a 0.2% fee, of which 0.17% is added to the Liquidity Pool.

For example:

• There are 10 FLIP tokens representing 10 FRST and 10 BNB tokens.

• 1 FLIP token = 1 FRST + 1 BNB.

• Someone trades 10 FRST for 10 BNB.

• Someone else trades 10 BNB for 10 FRST.

• The FRST/BNB liquidity pool now has 10.017 FRST and 10.017 BNB.

• Each FLIP token is now worth 1.00017 FRST + 1.00017 BNB