Decentralized Exchange Liquidity Farming on the G7 Network (Camelot DEX)
Decentralized Exchanges (DEX) allow for users to swap one token for another for a minor fee. Unlike Centralised Exchanges (CEX), the swapping of tokens occurs directly on the blockchain. The supply of tokens held within the DEX or a specific pool (a pair of tokens) can be provided by users, this process is referred to as adding liquidity.
For users, there are both benefits and risks with adding liquidity, a benefit being a fee earned for each swap which occurs in the pool the user added liquidity to. But there is a risk of impermanent loss.
This guide will walk you through the steps of adding liquidity to a pool on Camelot (a DEX on the G7 Network).
Note: Any user who supplies liquidity to a DEX should be aware of the risk of impermanent loss, and that loss of any kind while engaging in liquidity, staking or similar yield bearing activities are solely the responsibility of the user.
Additional Resources: Camelot Step-by-Step Guides
It is possible for users to add liquidity to any pools, and even create new pools based on token pairs which are not already available on the DEX. But for this guide we will focus specifically on adding liquidity to an existing G7/USDC pool on the G7 Network.
This is a DEX pool that allows users to swap equivalent values of $G7 to USDC and vice versa on the G7 Network.
Finding the G7/USDC Pool
Go to Camelot and from the network dropdown in the top right corner, switch to “G7 Network”
Connect Wallet:
Once on the G7 Network, connect your wallet (e.g., MetaMask), ensuring you connect to the G7 Network when prompted.
Navigate to the Liquidity Section:
Under “Trade” in the navigation bar, select Liquidity from the dropdown.
Select the $G7/USDC Pair:
In the liquidity section, select the “V3” tab - this is the protocol of the DEX we will be using
And then select $G7 and USDC as Token 1 and Token 2 under “Select Pair” (either token as either token number leads to the same result)
Enter the Amounts:
Once the tokens are selected, you will receive a list of options which you can configure for the tokens you will be providing. It is recommended that you read more here.
Once you are ready, input the amount of $G7 or USDC you’d like to add to the pool. Camelot will automatically calculate the required amount of the other token based on the selected token’s current price.
Approve Tokens:
If this is your first time adding liquidity, approve both $G7 and USDC on the G7 Network by clicking Approve and confirming the transaction in your wallet.
Add Liquidity:
Once both tokens are approved, click Create Position to add liquidity to the pool.
Confirm the transaction in MetaMask.
Receive LP Tokens:
After the transaction is confirmed, you’ll receive an on-chain LP Token (Liquidity Provider/Pool Token) G7/USDC, which represents the liquidity you have added to the pool, and is required when you withdraw your liquidity.
Single-Side Liquidity Adding allows users to add a single token to an existing pool, opposed to adding an equal amount of both tokens which comprise the pool. To learn more, check out the official documents.
In addition to earning a fee on each swap, liquidity providers will also be able to accrue further rewards on the G7 Network when adding liquidity to specific pools (or incentivized pools) during specific periods.
During the launch of the G7 Network, adding liquidity to the G7/USDC pool will not only reward liquidity providers with swap fees, but also $G7 and Game7 Diamonds. The rate of $G7 accrued will be relative to the amount of liquidity provided, with the Diamond rewards being issued at a rate of 4 Diamonds for every $G7.
If liquidity providers want to receive the Diamond rewards, they must first create a Game7 Portal account. This ensures that Diamonds will be accrued. The Diamonds are then credited to their account when they claim the $G7 which has been accrued through providing liquidity.
To learn more about this system, check out Staking.
