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Problems of providing an uneven liquidity

#1

Hi all!
I read some material in the community, like Supply liquidity for Incognito DEX. Provide privacy for the world. and this one Provide, and also some others, but I could not find an answer to my question.
It’s said that “All you need to do is provide even liquidity to both sides of the pair”, well, what if I don’t? And if I must, why does Incognito allows me to do it unevenly?

As a test I put
0.005 PRV
100 ZIL
Tha’s uneven

What are the implications of this? What harm am I doing to the pool, or to myself?

#2

The first one who creates a trading pool sets the price. Any price will do. It is determined by the amounts of coins you supply for each coin of the trading pair.

A constant number is generated from those amounts. This number is used in future price calculations.

After this first deposit of coins, the next person who wants to add liquidity to that trading pair will have to add amounts of the coin at the current ratio to keep the pair balanced. Adding liquidity should not change the price.

That is what is meant by “even”, at the current ratio.

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#3

Thanks @Jamie
So it means that if I try to provide to an existing pair I’ll be forced to do it evenly according to ratio set before?

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#4

No you don’t have to. The network will add these tokens based on the current ratio and return the remaining fund to you.

Let’s say the current pool has 2 PRVs and 10 ZILs, so the ratio is 1PRV:5ZIL. If you

  • provide 20 PRVs + 50 ZILs, then 10 PRVs + 50 ZILs will be added to the pool, 10 remaining PRVs will be returned to you;
  • provide 10 PRVs + 100 ZILs, then 10 PRVs + 50 ZILs will be added to the pool, 50 remaining ZILs will be returned to you.
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#5

Yes exactly. Only the one who initiates a trading pair is free to add amounts in whatever ratio he or she likes.

@daniel explains how the system will correct your additions to match the current ratio, but it still means only “even” amounts will be accepted.

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#6

Wow…was not aware myself of how the adding to the pool funds worked and how the amounts were determined…thank you so much @daniel and @Jamie for enlightening me today…learned something new I have to admit… :sunglasses:

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#7

To make it more clear.
If I were to start a new trading pool for MIC (my-imaginairy-coin) and USDT, I could decide to make the value of the MIC coin $0.50 by adding 1000 MIC and 500 USDT to initiate that trading pair.

The price of the MIC coin will shift with every trade that is performed.

Let’s say after some time I (or someone else) want(s) to add more liquidity to that pair. And assume the price has gone up 1 MIC is $0.75 now

Now I need to add 1000 MIC and 750 USDT, (or 1 MIC and 0.75 USDT, or any other number that fits the ratio)

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