What is a liquidity pool?#
A liquidity pool is a smart contract that holds two tokens and applies AMM rules so users can swap between them. Liquidity providers supply the assets, receive a position, and earn pool fees while accepting market and smart-contract risk.
How v2 pools work#
CenturionDEX v2 uses the constant-product formula x · y = k. The pool holds reserves of token X and token Y. A swap adds one token and removes the other, changing the reserve ratio and therefore the marginal price.
Every v2 pool charges a flat 0.30% swap fee. Liquidity is full range, so every position is active at every possible price. A provider receives fungible CRC-20 LP tokens representing a proportional share of the pool.
For example, a pool with 1,000 CTN and 100,000 units of another token begins near 100 tokens per CTN. A CTN-to-token swap increases the CTN reserve and decreases the token reserve, so later units execute at a less favorable rate than the first.
How v3 pools work#
CenturionDEX v3 uses concentrated liquidity. Providers choose a price interval bounded by ticks and select one of the 0.01%, 0.05%, 0.30%, or 1.00% fee tiers.
Liquidity is active only while the pool price is inside the chosen range. Narrow ranges can provide more depth near the current price with less capital, but they become inactive sooner and can increase exposure to impermanent loss and rebalancing costs. Each v3 position is a distinct CRC-721 NFT.
What liquidity providers earn#
Pool fees accrue from swaps that use active liquidity. Fees are not guaranteed income and may not offset:
- Impermanent loss relative to holding the tokens.
- Token price declines.
- Out-of-range time in v3.
- Network costs for creating, adjusting, collecting, or removing a position.
- Token-contract behavior, smart-contract risk, or thin-market manipulation.
Native CTN is represented as WCTN inside pools. The interface can wrap CTN when it enters a pool and unwrap WCTN when appropriate, while network costs remain payable in native CTN.
Common issues#
- No swap route: the pair may have no pool or no usable active liquidity.
- High price impact: the trade is large relative to available depth.
- A v3 position earns no fees: it may be outside its selected range.
- The pool contains a fake token: verify both token contract addresses.
- Withdrawal output changed: the pool ratio moved while liquidity was active.
Stay safe#
Providing liquidity is not a deposit with guaranteed principal or yield. Verify the pool version, tokens, fee tier, and range. Review every approval and wallet transaction, and never share a recovery phrase or private key.