Learn the Basics
Welcome to the TokenSwap Documentation, the hub for those interested in learning more about TokenSwap. The wiki is divided into sections to cater for each of different group.

Learn TokenSwap

What is an Automated Market Maker?

An Automated Market Maker (AMM) works similarly to an order book exchange in that there are trading pairs – for example, BSV/USD. However, you don’t need to have a counterparty (another trader) on the other side to make a trade. Instead, you interact with a liquidity pool using a smart contract that β€œmakes” the market for you.

What is a Liquidity Pool (LP)?

You could think of a Liquidity Pool as a big pile of funds that traders can trade against. Users can deposit an equivalent value of two tokens to a Liquidity Pool and in return receive LP tokens which represent their share of the Liquidity Pool. Liquidity providers earn fees from the trades that happen in their pool.

Impermanent Loss

Impermanent loss happens when you provide liquidity to a liquidity pool, and the price of your deposited assets changes compared to when you deposited them. The bigger this change is, the more you are exposed to impermanent loss. In this case, the loss means less dollar value at the time of withdrawal than at the time of deposit.


Last modified 21d ago
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