Liquidity Structure

Below is a description of how CryptoLink's Liquidity Pools will be modeled and rewarded.

The fees ultimately go to Liquidity Providers in exchange for them putting their tokens in the pool to facilitate trades. Trade fees are collected at the time of a swap, and it goes directly into the pool, growing the pool's balance. For a trade with a given $inputToken$ and $outputToken$, the amount collected by the pool as a fee is $Amount_{fee} = Amount_{inputToken} * swapFee$. As the pool collects fees, CryptoLink Pool Tokens automatically collect fees because they represent a proportional share of the pool.

Example

Let's say Alice, Bob, Chuck, and Diana all provide liquidity in the same pool starting out with a total value of $100. After some time, the pool has collected many trade fees and is now worth $200. The pool itself grows while the Liquidity Providers' proportional shares stay the same.

Person	Proportional Share	Initial Value	Value After Trading
Alice	50.0%	$50	$100
Bob	25.0%	$25	$50
Chuck	12.5%	$12.50	$25
Diana	12.5%	$12.50	$25