Liquidity Pool FAQ

What is the difference between “Mint LP Shades and Stake” vs “Mint LP Shares”:

Mint LP Shares + Stake is a one-step process where you provide liquidity and the LP tokens are immediately staked to earn rewards.

Mint LP Shares is a two-step process - first you provide liquidity to mint the LP tokens, and then you'd have to manually stake those LP tokens separately to earn staking rewards on top of trading fees.

Note the two options when clicking "Provide" when providing liquidity to a liquidity pool:

  • Mint LP Shares + Stake: Earn further rewards by staking your LP token in Shade's reward contract.

    • If you choose "Mint LP Shares + Stake", then you will seamlessly stake your LP tokens in a one-step process.

    • Note: You can unstake your LP tokens instantly at any time!

Mint LP Shares: Hold onto your LP tokens and only collect trading fees.

  • If you choose "Mint LP Shares", you can manually stake your LP tokens by pressing the “Stake” button. There is a second step though where you have to manually stake those LP tokens separately to earn staking rewards on top of trading fees.

How often should I claim liquidity pool rewards?

This is a personal preference. Rewards can be claimed minute after minute, once a year, or more. Things to consider are:

  1. You pay a transaction fee each time you claim.

  2. Any unclaimed rewards will not earn rewards. If you claim rewards and compound them that means you have added more shares to the pool, which in return will be a larger number of shares to earn rewards off of.

"The Liquid Staking Derivative DEX of DeFi" - What does this mean?

ShadeSwap is a privacy-preserving AMM built on Secret Network that is front-running resistant by default. ShadeSwap offers asymmetric concentrated liquidity, allowing for the most efficient staking derivative swaps in all of DeFi.

ShadeSwap features the following:

  • Private Trading

  • Front-Running Resistant

  • Asymmetric Concentrated Liquidity

  • Protocol Owned Arbitrage

  • Stablecoin Pairings

  • Unified Router Liquidity

ShadeSwap pools and integrations are unified by SILK, a private, collateralized reflexive stablecoin pegged to a basket of global currencies and commodities.

What does Asymmetric, Concentrated Liquidity mean?

Unlike centralized exchanges, Decentralized Exchanges (DEXs) are not based on a single centralized entity acting as custodians or intermediaries. Instead, traders on DEXs retain full control of their funds and private keys, and smart contracts execute trades for users in a neutral and automated fashion.

Most DEXs use Automated Market Maker (AMM) models to define the rules of trading, rather than relying on the order book model. An AMM algorithmically computes the price of the tokens inside a liquidity pool based on the supply and demand of the tokens in the liquidity pool. The allowed sizes for these liquidity pools can then be plotted onto a graph, forming a unique pricing curve. When you do a swap, the curve takes your inputted token amount and uses that to calculate what the other token's supply must be. Additionally, liquidity providers can deposit their tokens into liquidity pools in exchange for rewards coming from swap fees and token farming.

In short Asymmetric, concentrated liquidity refers to a model in decentralized exchanges where liquidity providers concentrate their capital within a specified price range instead of providing liquidity across the entire price curve.

What is an Automated Market Maker (AMM)?

Automated market makers are smart contracts that empower users to trade token pairs without needing to interact with other traders and market makers as (often centralized) counter parties. In essence, an AMM changes the form of trading from peer-to-peer to instead peer-to-contract, creating a decentralized and censorship resistant trading system for anyone in the world to interact with. Each token pair (e.g., SILK/SHD) are their own smart contract for users to trade with.

AMMs are free of order books and order types. Instead, formulas determine asset prices.

Note: Using AMMs, users do not need another party or trader to make a trade. Instead, users interact directly with that contract, which make the market for the user. Hence the name Automated Market Makers. AMM liquidity is provided by liquidity providers ("LPs").

What is Miner Extractable Value (MEV)?

Miner Extractable Value is the process by which arbitrage entities insert their trade transactions in front of a user in anticipation of their trade - resulting in micro profits that the user suffers from in the form of greater slippage. This front-running process is made possible because to date, the majority of blockchain mempools are public by default.

ShadeSwap solves this problem by being built on Secret Network - a private-by-default blockchain which has an encrypted mempool as well as privacy-preserving smart contracts (known as "secret contracts").

Note: Entities are unable to front-run trades on ShadeSwap because trades are kept encrypted, preventing front-runners from extracting profits in a risk free manner at the cost of the user.

What is a Liquid Staking Derivatives (LSDs)?

SilkSwap's asymmetric control over its curve allows for flexibility in any type of market. Specifically, SilkSwap excels in markets with asymmetric order flow. Using Liquid Staking Derivatives (LSDs) as an example, SilkSwap assumes that the price point of a staking derivative in a liquidity pool will not remain above the minting price point of the derivative for a long time. The reasoning behind this is because arbitrageurs would mint out the staking derivative and sell it for a premium on ShadeSwap, driving the price disparity back into harmony.

ShadeSwap has already displayed its power in its first week of launch. Osmosis, another DEX in the Cosmos Ecosystem, features a liquid staking derivative pool that is over 33x larger in liquidity than the same pool on ShadeSwap. However, with a trade that is 20% the size of the liquidity in the pool, Osmosis incurs price impact of ~25%, while ShadeSwap only incurs price impact of ~0.25% - making ShadeSwap 100x more efficient with 33x less liquidity.

Information provided in this post is for general informational purposes only and does not constitute formal investment advice. Please read the full disclaimer at before relying on any information herein.

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