FAQ - Liquidity Pool Staking

Why do we pair tokens when staking them in liquidity pools?

• Pairing tokens in liquidity pools is based on Automated Market Makers (AMMs), which facilitate token trading within staked asset pools.

• In this system, the exchange rate adjusts dynamically based on buying and selling activities within the pool.

• Pairing tokens ensures liquidity is maintained, allowing the AMM to function smoothly.

What is liquidity pool staking?

• On Unit Network, liquidity pool staking involves contributing tokens to the exchange pool.

• This allows individuals to trade against the pool.

• A small fee is deducted from each trade and added to the pool.

• This fee incentivizes people to stake tokens and contribute liquidity.

Can you exchange any token for another token directly on Unit Network?

• Each token on Unit Network has its own liquidity pool, paired with USDU, the US dollar stablecoin, as TOKEN-USDU.

• When trading TOKEN for USDU or vice versa, individuals trade with the pool rather than directly with another person.

• After one token is added and the other is removed from the pool, minus the trading fee, the pool's ratio adjusts back to a 50-50 value.

• The price of one token in terms of the other changes accordingly, similar to how it works on uniswap.org.