Liquidity Provider(LP)

Introduction

As a Liquidity Provider (LP), you play a crucial role in Nemo ecosystem by supplying liquidity to the protocol. This document provides essential details about being an LP, including the benefits, requirements, and processes involved.

What is a Liquidity Provider?

A Liquidity Provider is an individual or entity that supplies assets to a liquidity pool, enabling users to trade seamlessly within the Nemo Protocol ecosystem. By providing liquidity, you help maintain market stability and enhance the trading experience for all users.

Nemo's LP consists of the underlying asset and its corresponding PT token, for example sSUI-PT sSUI. There are two modes for adding liquidity:

• Single-Coin: In this mode, users add liquidity using only the underlying asset. For example, by using sSUI. Nemo will assist users by converting a portion of the underlying asset into PT according to the pool's ratio and complete the provision.

• Multi-Coin: In this mode, users add liquidity using both the underlying asset and PT. For example, using sSUI and PT sSUI. During this process, Nemo will not perform any swaps.

Why to be a LP?

As an LP of Nemo, there are multiple benefits:

Yield rewards

The yield for Nemo LPs comes from various sources, typically consisting of the following components:

• Underlying Yield: the yield generated by underlying assets, eg. sSUI.

• Fixed Yield: the fixed yield from PT.

• Swap Fee

• $NEMO Incentives

No impermanent loss (IL)

Unlike traditional AMM models, there may be short-term price fluctuations in Nemo, but at the maturity, there is no IL, the technical breakdown is as below:

At maturity, the PT can be exchanged for the underlying asset (as detailed in the definition of PT). Therefore, the LP composed of PT and the underlying asset will both become the underlying asset at maturity.

• For example, a sUSDC pool composed of PT sUSDC & sUSDC. At maturity, these will both be claimed as USDC.

Although LPs may still experience value loss due to price fluctuations in the short term(before maturity), there will be no issue of impermanent loss at maturity. In other words, the longer LPs stay in the pool, the better the performance of their asset appreciation will be.

No lock-up period

As a Nemo LP, you can withdraw at any time. While as recommended, there might be slight value loss in short term, so it's always recommended to hold LP positions longer to maturity which will maximize your capital efficiency.