Drift Protocol v2

โŒ˜K
๐Ÿ‘พWelcome to Drift Protocol
๐ŸงฎDrift DEX
๐Ÿ‘‹Getting Started
๐Ÿ“ˆPerpetual Futures
๐Ÿ“ŠSpot Margin Trading
๐ŸฆBorrow & Lend
๐Ÿ›๏ธStaking
๐Ÿ”ฌTechnical Explanations
๐Ÿ“Accounting and Settlement
โž—Borrow Interest Rate
๐Ÿ“œDelisting Process
โ›ฒDrift AMM
๐ŸƒJust-In-Time (JIT) Auctions
๐Ÿ“šKeepers & Decentralised Orderbook
โ˜ ๏ธLiquidators
๐Ÿ’งLiquidity Providers (LPs)
๐Ÿ“‹Protocol Guard Rails
๐Ÿ“Risks
๐Ÿ–ฅ๏ธDeveloper Resources
๐Ÿ“”Overview
โŒจ๏ธSDK Documentation
โŒจ๏ธTutorial: Bots
โš ๏ธTroubleshooting
๐Ÿ› ๏ธKeeper Bots
๐Ÿ› ๏ธTrading Bots
โŒจ๏ธHistorical Data (v1)
โŒจ๏ธAPI
๐Ÿ›ก๏ธSecurity
๐Ÿ›ก๏ธAudits
๐Ÿ›ก๏ธBug Bounty
โš–๏ธLegal and Regulations
๐Ÿ“Terms of Use
๐Ÿ“Disclaimer
๐Ÿ“Privacy Policy
๐Ÿ“Competition Terms and Conditions
๐Ÿ“šGlossary
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3min

Liquidity Provision

Overview

Users that elect to provide liquidity into the Liquidity Pool will be able to select which market they'd like to provide liquidity for. By doing so, the user becomes an LP.

Providing liquidity increases the total pool of liquidity available within that market by increasing K. In turn, this lowers slippage and reduces price impact; resulting in an overall better trading experience for other users.

Since the LP collateral is cross margined within Drift, they'll continue to earn lending interest and have capital available for margin trading.

Reward

For providing liquidity to the DAMM, LPs receive a proportion of the following fees generated by the selected market relative to the liquidity they provide:

  • 80% of Trading Fees as proportionate to their liquidity (versus the total K) for that market

Additionally, when trades occur against the DAMM, LPs will automatically receive a proportion of the DAMM's future positions. For example, if an LP starts providing 10% of the liquidity to the DAMM in the SOL market, and then a trader goes opens a 10 SOL long position, then the LP will receive a 1 SOL short position.

๏ปฟ

For more technical information on providing liquidity, please see Liquidity Providers (LPs). ๏ปฟ

Updated 16 Dec 2022
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Overview
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