Welcome to another episode of “Wavelength Explained”. This time around, the theme is Custom Liquidity Pool Composition. Custom Pools are a big part of the community aspect of decentralized protocols. Why you may ask? Because they distribute a major part of the protocol’s development efforts across the community, pool offering.
As a protocol grows and the ecosystem around it evolves, more assets need to be made available to trade. For that to happen, new Liquidity Pools have to be created. Luckily, any user can single-handedly create a Custom Liquidity Pool with ease. The customizability feature allows Pool Creators to set parameters like the trade fee or the number of tokens in the pool to their liking.
With that said, let’s dive into the tutorial below.
How to compose a Custom Liquidity Pool:
Step 1: Connect your wallet and go to the “Pools” tab on Wavelength’s website.
Step 2: Click on the “Compose a pool” button.
Step 3: Now it is time to choose the following parameters: 1) Pool Name; 2) Pool Symbol (Must start with “WPT-”); 3) The fee your pool will charge per trade (must be within 0.0001% and 10%).
Step 4: Now that those parameters are set, it’s time to choose how many tokens will be in the pool and each token’s weight. Note: Token weights are entirely custom but their sum must equate to 100%. Also, The maximum number of tokens that a Wavelength pool can hold is 8. The pool in this example will only take two tokens, $MATIC, and $VLX. To add more tokens simply click on the “+” button.
Step 5: Click on the “Approve” button to approve each token going into the pool. This is only necessary the first time you create a pool with a given set of assets. Each token approval will require a quick and cheap transaction. Sign each transaction in your wallet.
Step 6: Make sure your wallet holds some arbitrary amount of each token that makes up the pool. This is necessary because in order to create a new Custom Pool you must first add some liquidity to it. Although you can add any amount, it is preferable to respect the designated weights, otherwise, arbitragers will take advantage of the imbalance and profit by collecting the excess token in that pool at a discount.
Step 7: Now, click the “Create Pool” and “Join Pool” buttons and sign both transactions in your wallet. Again, these should be quick and cheap.
Step 8: If successful, your screen should look similar to the image below.
Step 9: And that is it! You have successfully created a Custom Pool on Wavelength.
Note, if you click on the “Take me to my pool” button, you will be taken to the pool’s dashboard where all its info is present. This is what the dashboard looks like:
Today you learned how to compose a Custom Liquidity Pool on Wavelength, a crucial part of the protocol development process. Hopefully, you will soon compose your own pools and help make Wavelength a more valuable protocol and a better product overall. As always, remember to regularly check all of the Wavelength’s social channels in order to stay up to date on all things Wavelength and Velas.
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