In this guide we will explain how to provide liquidity to Swapr pools on the Arbitrum network to earn swap fees and SUSHI rewards.
What is Arbitrum?
Arbitrum is a suite of Ethereum scaling solutions created by Offchain Labs that enables high-throughput, low cost smart contracts while remaining trustlessly secure. Arbitrum has three modes: AnyTrust Channels, AnyTrust Sidechains, and Arbitrum Rollup.
What is Swapr?
Swapr is a governance-enabled automated market maker with adjustable fees that is a project created by The DXdao, a decentralized organization initialized in May of 2019 and has over 400 unique stakeholder addresses. It develops, governs, and grows DeFi protocols and products.
What you will need to provide liquidity on Arbitrum Swapr
- Metamask wallet
- ETH tokens in your wallet for gas
- Two ERC-20 tokens to provide as liquidity on Swapr
Setting up the Arbitrum network with your Metamask wallet
First, you will need to configure your Metamask wallet to connect to the Arbitrum network. You will need to open Metamask and click on the Network selection dropdown and then click on Custom RPC.
Here is the list of the network parameters so you can easily copy them:
- Network Name: Arbitrum One
- New RPC URL: https://arb1.arbitrum.io/rpc
- Chain ID: 42161
- Symbol: AETH
- Block Explorer URL: https://arbiscan.io/
Fill out the empty fields as shown above and click on Save. You will be directly switched to Arbitrum’s Mainnet now in the network dropdown list. This process adds the Arbitrum network to the list of available networks you can switch to from within Metamask. Sometimes it is helpful to switch networks when Metamask is acting strange or if you are having trouble getting things to show up.
Move funds to Arbitrum network
You can use the “Arbitrum One Bridge” to move tokens over to the Arbitrum network from Ethereum. You will need to connect your wallet to the network you are transferring your tokens from and then use the bridge to move them over to the Arbitrum network. Just like Ethereum mainnet, Arbitrum uses ETH as gas so make sure you bridge some over. You can use L2fees.info to get sense of what the current gas costs are on Arbitrum.
Finding the right pool to provide liquidity
To find the best rewards on Swapr click “Pairs & Rewards” at the top of the page to get to the Pairs Menu. Be sure to click the button “With Rewards” to find the pairs with liquidity mining incentives. One important thing to note is that it will take 4 transactions to deposit and stake (2 approvals, 1 deposit and 1 stake) so make sure that you have enough ETH in your wallet to make those transactions. With the ETH value around $4500 and gas costs around 120 gwei, when doing this example it costs $5-7 per transaction.
Steps to add liquidity to Swapr
Using this menu you can select a token pair that you would like to provide liquidity to. Remember, you have to put an even proportion of each token into the pool (50/50) and you will typically have to approve each token before you can add liquidity. Luckily on the Arbitrum network this costs about 1/10th of the gas prices as mainnet Ethereum.
After selecting the pair that you would like to provide liquidity to, you will see the menu above. It shows the liquidity and volume in the pair as well as the rewards and amount staked. Click the “Add Liquidity” button to get to the next step.
The menu above is where you can add liquidity to the pool. Swapr charges a 0.25% swap fee which will get distributed to liquidity providers in the pool. You will have to complete a transaction to approve any tokens you have not already approved on Swapr. After you have added liquidity, Swapr will give a readout of the token balances that indicate your share of the pool based on how many tokens you entered into the pool as shown below.
Stake your Swapr LP tokens to start earning SWPR rewards
Once you have added the liquidity, you will have Swapr Liquidity tokens (SLP) in your wallet that you can manage from the Swapr site and then proceed to stake those LP tokens to start earning rewards. To get to the staking screen, you will need to click on the box that shows the pair with the rewards APY (pictured below)
Once you click that box you will be given the options to deposit, stake and claim rewards as pictured below.
How to withdraw liquidity and what to expect
In the above picture you will need to click on the “Claim and Withdraw” button to claim your rewards and unstake your LP tokens. . Much like with Uniswap, when you withdraw your liquidity from the Swapr Arbitrum pools you will get back a different number of each token than when you started. That is due to the automatic rebalancing that is a core feature of automated market makers (AMM’s).
You are able to see this process in action when tracking your tokens on APY.Vision. APY.Vision provides real-time tracking that illustrates the impermanent loss or gain of a liquidity pool position as shown below.
To withdraw your liquidity from Swapr, you must first unstake the LP tokens if you have them staked and earning rewards. Once they are unstaked you can remove liquidity (button pictured below) and your LP tokens will be converted back into the two tokens you initially entered into the pool.
Providing liquidity is a great way to earn some income on tokens sitting in your wallet. You do have to be careful when providing liquidity, as sharp price increases or decreases can have a huge impact on the performance of your position. We suggest using APY.Vision to keep a close eye on your positions to know when to remove liquidity during times of extreme price volatility.
APY.Vision does not give investment advice and always insists that you do your own research. Read our full Legal Disclaimer.
Check out APY.Vision!
APY.Vision is an advanced analytics tool for liquidity pool providers and yield farmers. If you’re using any DEXs, AMMs, or liquidity pools this is the tool you will need to easily track the ROI of your liquidity provider and yield farming activities. Try it now!