What is LP?

LP stands for Liquidity Provider (the person) or Liquidity Providing (the activity). It's how you can earn passive income while supporting the INFINITY ecosystem and making trading better for everyone.

The Simple Explanation

What LPs Do

• Deposit tokens into trading pools (like $8 and S)
• Provide liquidity for other people to trade against
• Earn fees from every trade that uses your liquidity
• Receive rewards from the protocol and INFINITY treasury

Why It Matters

Without LPs, there would be:

• ❌ No trading possible on DEXs
• ❌ Massive slippage on all trades
• ❌ Poor pricing for buyers and sellers
• ❌ No DeFi ecosystem

With LPs, we get:

• ✅ Smooth trading experience
• ✅ Tight spreads and low slippage
• ✅ Deep liquidity for large trades
• ✅ Thriving DeFi ecosystem

How LP Works for INFINITY

The $8/S Pool

When you provide liquidity to the $8/S pair:

1. Deposit equal values of $8 and S tokens
2. Receive LP tokens representing your share of the pool
3. Earn trading fees from every swap (typically 0.3%)
4. Get SHADOW rewards from Shadow Exchange
5. Receive $8 bribes from INFINITY treasury

Multiple Earning Streams

• Trading fees: Immediate income from swap volume
• SHADOW tokens: Platform rewards for participation
• $8 bribes: Additional rewards from the Infinity treasury
• Governance rights: Vote on future reward distribution

Pool Types Explained

Concentrated Liquidity (CL) - Advanced

Best for: Active users who want maximum returns

How it works:

• Choose price range where you want to provide liquidity
• Higher capital efficiency (10-100x more than V2)
• Higher fees when price stays in your range
• Active management required when price moves

Example:

• Current $8 price: 0.01 S
• You choose range: 0.008 - 0.012 S
• Your liquidity only active in this range
• Much higher fees but requires monitoring

Volatile Pool (V2-style) - Simple

Best for: Passive users who want "set and forget"

How it works:

• 50/50 split across all possible prices
• Always active regardless of price movement
• Lower capital efficiency but no management needed
• Steady rewards without range optimization

Example:

• Deposit $100 of $8 + $100 of S
• Always earning fees regardless of price
• Lower fees but no active management required

Risks and Rewards

Understanding Impermanent Loss

What it is: The temporary loss when token prices change

Example scenario:

• You deposit when $8 = 0.01 S
• $8 price goes to 0.02 S (doubles)
• You'll have less $8 and more S than if you just held
• BUT you earned fees that may compensate

Important notes:

• Called "impermanent" because it only matters if you withdraw
• Fees often compensate for impermanent loss over time
• Less impact when both tokens move together

Reward Potential

Conservative estimate: 15-30% APR from:

• Trading fees: 5-15% APR
• SHADOW rewards: 5-10% APR
• $8 bribes: 5-10% APR
• Compounding: Additional growth

During high activity: 50-100%+ APR possible

Getting Started with LP

What You Need

• Equal USD value of $8 and S tokens
• Small amount of S for gas fees (~$1-5)
• Basic understanding of risks involved
• Wallet connected to Sonic network

Step-by-Step Process

1. Get your tokens ready - equal USD values of $8 and S
2. Visit Shadow Exchange at app.shadow.so
3. Connect wallet and verify Sonic network
4. Navigate to Pools section
5. Choose pool type (CL for advanced, V2 for simple)
6. Add liquidity with your tokens
7. Lock LP tokens in gauges for extra rewards
8. Vote with xSHADOW to maximize bribes

Pro Tips for Beginners

• Start small to learn the process
• Choose V2 pools for simplicity initially
• Monitor daily for the first week
• Join community discussions for strategy tips
• Compound rewards for exponential growth

Maximizing Your LP Returns

Shadow Exchange Strategy

1. Provide $8/S liquidity on Shadow Exchange
2. Lock LP tokens in Shadow gauges for SHADOW rewards
3. Convert SHADOW → xSHADOW for governance power
4. Vote for $8 gauge to maximize bribe allocation
5. Hold longer locks for increased voting power

INFINITY Ecosystem Benefits

• Support price stability through deeper liquidity
• Earn from flywheel as FeeM funds bribes
• Participate in governance of reward distribution
• Build community with aligned incentives

Common LP Strategies

Conservative Approach

• V2 pools only for simplicity
• Longer time horizons to ride out impermanent loss
• Regular compounding of earned rewards
• Diversified across multiple stable pairs

Advanced Approach

• CL pools with active range management
• Range optimization for maximum fee capture
• Strategic voting to maximize future bribes
• Automated tools for position management

Hybrid Approach

• Mix of V2 and CL positions
• Different time horizons for different positions
• Risk management across multiple strategies
• Learning progression from simple to complex

Tools and Resources

Analytics and Tracking

• Shadow Exchange interface: Built-in position tracking
• DeFiLlama: Third-party LP analytics
• Portfolio trackers: Zapper, DeBank for overview
• INFINITY dashboard: Track bribe distributions

Community Support

• Telegram: LP strategy discussions
• Discord: Shadow Exchange community
• Documentation: Shadow docs
• Tutorials: Step-by-step video guides

The Future of LP

Growing Opportunities

• More pairs as Sonic ecosystem expands
• Higher bribes as INFINITY treasury grows
• Better tools for position management
• Institutional adoption increasing overall volume

INFINITY LP Benefits

As an early INFINITY LP:

• First-mover advantage in bribe distribution
• Growing treasury means larger future bribes
• Network effects increase trading volume and fees
• Community recognition as ecosystem supporter

LP isn't just about earning fees—it's about becoming part of the INFINITY flywheel. Every dollar of liquidity you provide makes trading better, prices more stable, and the ecosystem stronger.

Ready to start earning? Check out the complete LP guide for detailed instructions.

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LP: Where holding $8 becomes earning $8.