Cross-Chain Bridge: How do Liquidity Pools work?


Tixl Tuesday Explained Series is here! The Cross-Chain Bridge uses Liquidity Pools to provide bridging services. All Liquidity Pools are designed as single-asset Liquidity Pools so that liquidity providers are never exposed to the well-known risk called Impermanent Loss that liquidity providers of DEXs are facing.

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The Liquidity Pools allow liquidity in any supported token to be added without the need to synchronize or partner with a project or even grant token minting permission to the bridge contract. Once a token is listed (and mapped on all networks; see Permissionless Listing) and once liquidity is available on all networks, users can bridge.

IMPORTANT: The USDC, USDT and TXL Liquidity Pools being were started with deposit limits. These will increase slowly, but regularly to make sure we are able to securely grow the protocol and keep the rewards/APRs attractive. To get notified about deposit limit increases, subscribe to https://t.me/tixl_announcements and https://twitter.com/tixlorg (and make sure you turn on notifications by clicking on the bell in Twitter).

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A liquidity provider (LP) puts liquidity in a Liquidity Pool.

As a “receipt”, the liquidity provider receives a LP Token that can be used

  1. to withdraw liquidity at a later date and

  2. to access a Liquidity Mining Pool (earn option 1) or a BRIDGE Farm, if available (earn option 2). To avoid excessive withdrawal activity, there is a small 0.2% fee on withdrawals from the Liquidity Pools.

Important: LP Tokens do not earn rewards automatically, they have to be put in either a Liquidity Mining Pool or a Farm, if available.

The users of the token bridge use the liquidity of the liquidity providers to perform their transactions. As a protocol incentive fee, bridging users pay a small bridging fee. Being a community-oriented project, the Smart Contracts circulate the major part of the accumulated protocol incentive or bridging fees back to its liquidity providers and BRIDGE token owners. 70% of the protocol incentive or bridging fees go to the corresponding Reward Pool of the bridged token and 15% go into the corresponding Liquidity Mining Pool of that token.

 

 

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