Providing Liquidity on VirtuSwap

Liquidity Provision on VirtuSwap is quite similar to traditional AMMs. LPs provide liquidity to VirtuSwap AMM pools and receive returns in the form of fees and VRSW rewards where applicable.

The main difference from traditional AMM pools is that the VirtuSwap pools hold not only the two Native Assets, but also a certain number of Reserve Assets. Therefore, the LP holdings in the pool include not only their share of the Native Assets, but also their share of the Reserve Assets, exposing the LPs to additional risk.

Every pool has a list of Allowed Reserves showing all the assets it can accept as reserves. In the initial release of VirtuSwap, all pools in the system have the same list of Allowed Reserves. The list can be updated from time to time by the governance procedures.

VirtuSwap limits the LP risk in two ways:

1. The total value of reserves held in the pool is limited by the Reserve Threshold (see Reserve Ratio and Threshold)

2. The Exchange of Reserves routine that eliminates reserves in pools by exchanging reserve assets for native assets with other pools.

When LPs withdraw funds from the pool, they receive their relative share of the Native Assets in the pool, and also their relative share of Reserve Assets present in the pool at the moment of withdrawal.