# Liquidity Providing

Liquidity is added to Flash Trade pools by liquidity providers (LPs) who deposit assets to facilitate trading. Each trade that passes through Flash protocol generates dynamic fees, and LPs earn their pro-rata share of these revenues while serving as the counterparty to all trader positions.

## **How Liquidity Providing Works**

When you provide liquidity to Flash Trade, you deposit assets into multi-asset pools that traders use for perpetual trading. In return, you receive FLP tokens representing your pool ownership and earn fees from all trading activity.

### **Revenue Sources for LPs**

LPs generate yield through multiple fee streams:

* **Open/Close Position Fees:** Charged on every trade execution
* **Margin Fees:** Continuous fees on leveraged positions
* **Swap Fees:** When users convert between pool assets
* **Liquidation Bonuses:** Remaining collateral from liquidated positions
* **Add/Remove Liquidity Fees:** Dynamic fees from other LPs joining/leaving

Additionally, when traders lose money, those losses flow directly to LPs as profits.

### **Choosing Your LP Token Type**

Flash offers two liquidity providing options with different reward mechanisms:

#### FLP vs sFLP Tokens

***Flash offers two types of liquidity providing tokens with different reward mechanisms:***

<table><thead><tr><th width="155.41796875">Feature</th><th width="296.08203125">FLP</th><th width="298.1171875">sFLP</th></tr></thead><tbody><tr><td><strong>Reward Style</strong></td><td>Auto-compounds into token price</td><td>Paid out in USDC every hour</td></tr><tr><td><strong>Fee Share</strong></td><td>Up to 90% protocol fees</td><td>Up to 90% protocol fees</td></tr><tr><td><strong>Tradability</strong></td><td>Buyable/sellable on markets</td><td>Mint-only, non-tradable</td></tr><tr><td><strong>Management</strong></td><td>Set-and-forget</td><td>Active reward collection required</td></tr><tr><td><strong>Voltage Points</strong></td><td>Yes</td><td>Yes</td></tr><tr><td><strong>Best For</strong></td><td>Passive investors</td><td>Users wanting direct USDC payouts</td></tr></tbody></table>

### **Getting Started**

{% stepper %}
{% step %}
**Choose Your Pool**

Select from FLP.1 (main crypto pool) or FLP.3 (Solana DeFi pool)
{% endstep %}

{% step %}
**Select Token Type**

Decide between auto-compounding FLP or manual-claim sFLP
{% endstep %}

{% step %}
**Deposit Assets**

Add any supported pool asset (optimal deposits help balance ratios)
{% endstep %}

{% step %}
**Receive LP Tokens**

Get FLP/sFLP tokens representing your pool share
{% endstep %}

{% step %}
**Earn Fees**

Start earning from all trading activity immediately
{% endstep %}
{% endstepper %}

<figure><img src="/files/eAxlnjWSdKV6zcbOb9Kk" alt=""><figcaption></figcaption></figure>

### **Dynamic Fee Structure**

Minting and burning FLP tokens incurs fees that vary based on pool composition:

{% columns %}
{% column %}
**Fee Optimization:**

* **Lower Fees:** Deposit underweight assets (below target ratio)
* **Higher Fees:** Deposit overweight assets (above target ratio)
* **Balance Incentive:** Fee structure naturally encourages pool balance
  {% endcolumn %}

{% column %}
**Burning Fee Components:**

* Dynamic fee based on pool balance after withdrawal
* Additional 5bps penalty to discourage frequent withdrawals
* Fees help maintain pool stability and long-term LP profitability
  {% endcolumn %}
  {% endcolumns %}

{% hint style="success" %}

## USDC Special Fee Structure

* **Adding/Minting** liquidity using USDC, fees are zero.
* **Removing/Burning** liquidity for USDC is a fixed 15 bps.
  {% endhint %}

***

### **How APRs are displayed on Flash Trade's Earn page**

Flash Trade's Earn page shows two different return calculations:

* **Default Display:** 7-day rolling average APR
* **Hover Display:** Previous day's annualized return

These numbers reflect actual LP performance including all fee sources and trader PnL.

<figure><img src="/files/noevgarkKrv6B8c42yKa" alt=""><figcaption></figcaption></figure>

{% hint style="warning" %}

#### **Risk in providing Liquidity to Flash Liquidity Pools**

LPs should be aware of the following risks when providing liquidity:

* **Trader Utilization Risk:** In a Pool-to-Peer system, LPs are constantly borrowing exposure to their assets appreciation in exchange for trading fees (both open/close and margin fees). This implies that LPs serve as the counterparty to traders on average. It is possible for traders to be on the right side of trades across relatively long times (months) but in the long run, Flash's fee structure and pricing engine will not allow for profits in the long run.
* **Asset Depreciation Risk:** Since FLP is made up partially of crypto currency assets, its value will fluctuate with the prices of those assets. There is Trader Utilization Risk as described above that will amplify or mitigate this effect in the short-term but in the long run, if crypto prices increase, LPs returns will follow and vice-versa.
* **Latency Risk:** In the case that the used oracle is providing a delayed price, a trader may be able to overcome the fee structure to provide themselves with consistently +EV trades. Flash's internal risk systems monitors all traders for behavior that would signify this is happening and adjust fees and spreads to ensure such trading is not possible.
* **Smart Contract Risk:** There is a possibility of on-chain contract logic being exploited. The team's code has been double audited in order to lower this possibility as much as possible.
  {% endhint %}


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