# Liquidity Mining

## <mark style="color:blue;">**Overview**</mark>

**Liquidity Mining** on Elys Network allows users to earn rewards by contributing liquidity to designated pools.&#x20;

<figure><img src="https://723411151-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FYSf8pZaRovewz0yJFl0a%2Fuploads%2FIeE7VWiLycBZYBHUQmTr%2Fimage.png?alt=media&#x26;token=0299726b-c412-4a44-a73e-452492c2fa99" alt=""><figcaption></figcaption></figure>

By adding assets to the liquidity pools, users not only facilitate smoother and more efficient trading within the network but also earn a share of the fees generated by multiple features. Liquidity mining provides an opportunity for users to passively earn while supporting the growth and stability of Elys Network’s decentralized exchange.

## <mark style="color:blue;">**How It Works**</mark>

When users contribute liquidity to Elys Network, they deposit pairs or single sided tokens into a liquidity pool.&#x20;

This pool serves as a reserve, allowing traders to swap tokens without depending on traditional order books, thereby minimizing slippage and enabling smooth trading experiences.&#x20;

In return for their contribution, liquidity providers receive rewards from multiple features, which are distributed based on the amount of liquidity provided and the level of activity within the pool.

<figure><img src="https://723411151-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FYSf8pZaRovewz0yJFl0a%2Fuploads%2FXOpfZ5JvCDd1gcnQ1PFk%2FLiquidity%20provider%2C%20unlocking%20full%20value%20for%20liquidity%20provider%20diagram.jpg?alt=media&#x26;token=004430bb-d4ca-4a57-8c83-e18d59f963b2" alt=""><figcaption></figcaption></figure>

Elys Network offers two types of pools: classic AMM pools and **Smart-Shielded Pools.**

While classic AMM pools use a simple mechanism with a fixed 50:50 weight between each token, Smart-Shielded Pools feature a variable weight that adjusts according to market conditions. This makes them more efficient and reduces the risk of impermanent loss to nearly zero.

### <mark style="color:blue;">Variable Swap Prices</mark>

Unlike traditional Automated Market Makers (AMMs), the swap price on Elys SmartShielded Pools varies based on the pool's needs.&#x20;

For example, in an BTC/USDC pool, if rebalancing requires a higher percentage of BTC, the fees for converting BTC to USDC will be low, and vice versa.

For more information about the mechanism: [<mark style="color:blue;">Click here</mark>](../swap)

### <mark style="color:blue;">Pool Balance Reward</mark>

When a swap or liquidity provider improves the weight and brings it closer to the target, both the swap fee and weight-breaking fee are reduced to 0. Additionally, an incentive bonus, known as the **"Pool Balance Reward"** is provided from a **"Bonus vault"** specifically designed to reward users participating in the weight balance.

### <mark style="color:blue;">Bonus Vault</mark>

Our bonus Vault collects 10% of all swap fees and redistributes them to incentivized weight recovery.

## <mark style="color:blue;">Benefits of SmartShielded Pools</mark>

Elys Smart-Shielded Pools offer several advantages:

* **Accurate asset prices**
* **Arbitrage opportunities for traders** thanks to low swap fees and our Weight recovery Reward system
* **Very low swap fees with negligible price impact**
