Skip to main content

Providing Liquidity

Earn trading fees by depositing token pairs into MegaPools. Liquidity providers enable swaps and receive a portion of fees from every transaction.

At a Glance​

  • Deposit token pairs to earn fees from swaps
  • Choose custom Liquidity Zones for optimal capital efficiency
  • Receive LP NFT representing your position
  • Withdraw liquidity anytime with no lock periods
  • Collect fees when withdrawing or manually claim
  • Real-time fee accrual tracking

How It Works​

You deposit equal value of both tokens, select a Liquidity Zone, and receive an LP NFT. As traders swap through your zone, you earn fees automatically.

Prerequisites​

Before providing liquidity:

  • Wallet connected to MegaFi
  • Both tokens of the pair available on MegaETH
  • Small amount of $MEGA for gas
  • Understanding of impermanent loss risk

Choosing a Pool​

Select a pool based on:

Volume​

Higher volume means more fee earnings:

High volume (> $10M daily): Major pairs (ETH/USDC, WBTC/ETH)
Medium volume ($1M - $10M daily): Popular tokens
Low volume (< $1M daily): Long-tail or new tokens

Check 24h volume statistics in pool info.

Volatility​

Higher volatility increases impermanent loss:

Low Volatility: Stablecoin pairs (USDC/USDT). Minimal IL, lower fees.

Medium Volatility: Blue chip pairs (ETH/WBTC). Balanced IL and fees.

High Volatility: Alt-token pairs. Higher IL risk, higher potential fees.

Fee Tier​

Match fee tier to volatility:

  • 0.05%: Stable pairs
  • 0.3%: Standard pairs
  • 1%: Exotic pairs

Higher fees compensate for higher risk.

Liquidity​

More liquidity means:

  • Lower fees per LP (split among more providers)
  • Less slippage for traders
  • More stable price
  • Lower price impact risk

Less liquidity means:

  • Higher fees per LP
  • Higher trader slippage
  • More volatile price
  • Higher price impact risk

Adding Liquidity​

Step 1: Select Pool​

Navigate to Pools page. Find desired token pair or click "Create Position".

If pool doesn't exist, you can create it.

Step 2: Choose Liquidity Zone​

Define price range for your liquidity:

Full Range: Entire price spectrum (like traditional AMM).

  • Pros: Always active, no management needed
  • Cons: Very low capital efficiency

Wide Range (e.g., ±50%):

  • Pros: Active most of the time, minimal rebalancing
  • Cons: Moderate capital efficiency

Medium Range (e.g., ±15%):

  • Pros: Good balance of efficiency and active time
  • Cons: Requires occasional rebalancing

Narrow Range (e.g., ±5%):

  • Pros: Maximum capital efficiency
  • Cons: Frequent rebalancing needed

The interface shows:

  • Current price
  • Suggested ranges based on volatility
  • Your selected range visualized
  • Expected APR for the range

Liquidity Zone strategies →

Step 3: Enter Amounts​

Enter amount of first token. The interface automatically calculates required amount of second token based on:

  • Current pool price
  • Your selected Liquidity Zone

Amounts must be proportional to current price. You cannot provide single-sided liquidity.

Step 4: Review Position​

Interface displays:

Token Amounts: How much of each token you're depositing.

Value: Total USD value of position.

Current Price: Pool exchange rate.

Zone Boundaries: Your lower and upper bounds.

Share of Pool: Your percentage of total liquidity in this zone.

Estimated APR: Projected annual return based on current volume and fees.

Step 5: Approve Tokens​

If first time providing these tokens, approve them:

  1. Click "Approve [TOKEN A]"
  2. Confirm in wallet
  3. Wait for confirmation (< 10ms)
  4. Click "Approve [TOKEN B]"
  5. Confirm in wallet
  6. Wait for confirmation

Both tokens require separate approvals.

Step 6: Add Liquidity​

Click "Add Liquidity" button. Confirm transaction in wallet.

Transaction includes:

  • Depositing both tokens
  • Minting LP NFT
  • Registering position in pool

Gas cost: ~ $0.005 - $0.01

Step 7: Receive LP NFT​

After confirmation:

  • LP NFT appears in your wallet
  • Position shows in "Your Positions" tab
  • Fee accrual begins immediately

The NFT represents your entire position including accumulated fees.

Managing Positions​

View Position Details​

Click any position to see:

Tokens: Amount of each token in position.

Value: Current USD value.

Unclaimed Fees: Fees earned but not yet collected.

APR: Actual earning rate over position lifetime.

Zone Status: Active (green) or Out of Range (red).

Price Chart: Current price vs your zone boundaries.

Add to Existing Position​

Increase liquidity in existing zone:

  1. Click "Add Liquidity" on position
  2. Enter additional amounts
  3. Confirm transaction

Fees and liquidity combine in the same LP NFT.

Remove Partial Liquidity​

Withdraw portion of position:

  1. Click "Remove Liquidity"
  2. Select percentage (25%, 50%, 75%, or custom)
  3. Review tokens received
  4. Confirm transaction

Fees are collected proportionally to amount removed.

Collect Fees​

Claim accumulated fees without removing liquidity:

  1. Click "Collect Fees" on position
  2. Review fee amounts
  3. Confirm transaction

Fees sent to your wallet. Position remains active.

Close Position​

Remove all liquidity and collect all fees:

  1. Click "Remove Liquidity"
  2. Select 100%
  3. Confirm transaction

LP NFT remains in wallet but represents zero liquidity.

Fee Earnings​

How Fees Accumulate​

Every swap through your Liquidity Zone generates fees:

Swap: 1 ETH for 2000 USDC
Trading fee: 0.3% = $6
Your zone contains: 10% of active liquidity
Your fee: $0.60

Fees accumulate automatically in your position.

Fee Display​

Position interface shows:

Unclaimed Fees: Total fees earned, awaiting collection.

APR: Annual return based on:

  • Fees earned / Position value
  • Time position was active
  • Extrapolated to annual rate

Daily Fees: Average daily fee earnings.

Fee History: Chart of fees earned over time.

Collecting Fees​

Two ways to collect:

Manual Collection: Click "Collect Fees" anytime. Gas cost ~ $0.003.

Automatic Collection: Fees automatically collected when removing liquidity.

Uncollected fees remain safe in the position. No rush to collect unless you need the funds.

Fee Optimization​

Maximize fee earnings:

Position Near Current Price: Zones around current price earn most fees.

High Volume Pools: More swaps = more fees.

Appropriate Fee Tier: Match fee tier to volatility.

Active Management: Rebalance when zone becomes inactive.

Impermanent Loss​

Understand IL before providing liquidity:

What Is Impermanent Loss?​

When token prices diverge, your position value may be lower than simply holding the tokens:

Start:
1 ETH = $2000
Position: 1 ETH + 2000 USDC = $4000 total

Later:
1 ETH = $3000
Position: 0.816 ETH + 2449 USDC = $3897 total
Holding: 1 ETH + 2000 USDC = $5000 total

Impermanent Loss: $1103 (22%)

IL occurs because the pool rebalances as price moves, selling the appreciating token and buying the depreciating one.

When IL Matters​

Price Returns: If price returns to starting point, IL disappears (hence "impermanent").

Fees Offset: Fee earnings often offset IL, especially in high-volume pools.

Divergence: IL increases as prices diverge. Worse for volatile pairs.

Minimizing IL​

Choose Correlated Pairs: ETH/WBTC moves together. Lower IL.

Stable Pairs: USDC/USDT has minimal IL.

Wide Zones: Full-range positions have lower IL than concentrated positions.

Active Management: Rebalance to mitigate IL effects.

IL Calculator​

MegaFi interface includes IL calculator:

  • Enter starting prices
  • Enter current prices
  • See projected IL
  • Compare with fee earnings

Use before deploying large positions.

Risk Management​

Start Small​

Begin with small amounts:

  • Learn how positions work
  • Experience fee earnings
  • Understand IL firsthand

Scale up after gaining confidence.

Diversify​

Spread liquidity across:

  • Multiple pools
  • Different volatilities
  • Various fee tiers
  • Different zone widths

Diversification reduces risk.

Monitor Regularly​

Check positions:

  • Daily: For narrow zones
  • Weekly: For medium zones
  • Monthly: For wide zones

Rebalance when:

  • Position goes out of range
  • Rebalancing cost < 5% of expected benefit
  • Market conditions change significantly

Use Strategies​

Deploy automated strategies:

  • Continuous rebalancing
  • Stop-loss mechanisms
  • Dynamic zone adjustment
  • Risk management algorithms

CLM →

Position on MegaETH​

Providing liquidity on MegaETH offers unique advantages:

Ultra-Low Rebalancing Costs​

Gas costs ~ $0.008 to rebalance position. Makes frequent adjustments economically viable.

Compare to Ethereum mainnet:

  • Remove liquidity: $50
  • Add liquidity: $75
  • Total: $125

MegaETH enables active position management that's unprofitable elsewhere.

Real-Time Fee Tracking​

Fees update continuously. See earnings accumulate in real-time, not after 12-second blocks.

Profitable Small Positions​

Low gas costs make even $100 positions profitable. On Ethereum, small positions lose money to gas fees.

Instant Execution​

Add or remove liquidity in sub-10ms. No waiting for confirmations.

Advanced Strategies​

Layered Positions​

Multiple positions with different zones:

Position 1 (narrow): $1900 - $2100 (high efficiency)
Position 2 (medium): $1800 - $2200 (backup)
Position 3 (wide): $1600 - $2400 (insurance)

Balances maximum efficiency with risk management.

Range Orders​

Use positions as limit orders:

Current ETH price: $2000
Create position: $2200 - $2300

If price reaches $2200+, your position converts ETH to USDC

Acts like a limit sell order while earning fees.

Hedge with Options​

Open opposite positions in Hedge:

  • Long LP position: Earn fees
  • Long put option: Protect against downside

Fee earnings help offset option premiums.

Hedge →

FAQ​

How much can I earn providing liquidity?
Varies by pool. High-volume standard pairs typically earn 10-50% APR. Stable pairs earn 5-15%.

Is there a minimum deposit?
No minimum, but consider gas costs. Positions < $100 may see gas costs reduce net earnings.

Can I withdraw anytime?
Yes. No lock periods. Remove liquidity instantly whenever you want.

What if price moves outside my zone?
You stop earning fees until price returns. Your liquidity converts entirely to one token. No loss occurs, but position is inactive.

Do I need to claim fees regularly?
No. Fees remain safe in your position. Claim when convenient or when removing liquidity.

Can I transfer my LP NFT?
Yes. LP NFTs are standard ERC-721 tokens. Transfer or sell them like any NFT.

Next Steps​

After providing liquidity:

Your capital working 24/7.