Liquidity Providers

In the context of Portal Network, liquidity provisioning plays a pivotal role in facilitating the operation of the ADMM protocol. This process involves the act of depositing assets to the liquidity pools within the Portal ecosystem. In essence, by providing liquidity, LPs are engaging in a lending mechanism where their assets are made available to the protocol for utilization in various swap operations.

Liquidity provision in the Portal ADMM closely resembles the process flow commonly seen in other protocols like Uniswap V3; only Portal enables a singular transaction between multi-blockchain assets.

Liquidity provisioning in the Portal Network varies depending on native settlement chains being used. For example, Bitcoin staking on Lightning mainly involves creating a payment channel between the LP and a Liquidity Pool. On other chains like Ethereum, staking and unstaking are driven by native smart contracts. The section below will describe in brief, the essential steps involved in providing liquidity to the Portal ADMM.

Connect Wallet

Before LPs get started, they need to interact with the LP interface that is part of PortalOS. The dApp’s “connect” button lets them connect their existing wallet with the dApp. The address used to connect to the dApp is called “Contributing Address”. For assets on EVM and account-based chains, Contributing Address will be used for any future refunds. For UTXO-based assets like Bitcoin, LPs can specify a refund address.

Add Liquidity

Liquidity Providers select the assets (or pairs of assets, depending on the liquidity pool) they wish to deposit. This automatically establishes an account on the Portal Notary Chain for the LP. This account acts as the storage for LP assets and orders, playing a vital role in linking LP contributions with their addresses.

Following this, Liquidity Providers can request a Deposit Address for each asset they intend to deposit and send funds to the respective Deposit Address. Validators will monitor these transactions, crediting the liquidity provider's account balance on the Notary Chain.

Manage Liquidity

To create orders within the ADMM, Liquidity Providers must ensure they possess a sufficiently large free balance on the Notary Chain in the associated assets. The ADMM supports two types of orders:

  • Range Orders: These are akin to Uniswap v3's orders.

  • Limit Orders: These are maker-only orders that require a standard swap. Filled orders are automatically closed, and swapped funds are returned to the virtual free balance.

Withdrawing Liquidity

When Liquidity Providers opt to withdraw their assets, they must specify a destination address (although the refund address is used by default) to which the withdrawal funds will be sent. The Validators are responsible for deducting gas fees, generating a transaction to deposit the requested funds into the specified address, broadcasting it on the relevant external chain, witnessing the transaction, and recording it as settled.

By following these steps, developers can actively participate in liquidity provisioning within the Portal ADMM, contributing to the liquidity pool and engaging in the efficient exchange of assets on the platform.

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