How to Provide Liquidity on ZERO Network

Liquidity is the lifeblood of any L2 network, and ZERO is no exception. To swap ETH into any other token, someone should provide liquidity. This can be you — and you can earn swap fees. In this guide, we’ll cover why provide liquidity, the risks, and how to start using the top DEXes on ZERO Network, including Reservoir and DODO.

Why provide liquidity 

By providing liquidity, you earn trading fees by enabling token swaps on decentralized exchanges (DEXes). 

As a liquidity provider (LP), you deposit a pair of tokens into a liquidity pool. Each time users trade using your pool, you earn trading fees. How much fees you can earn depends on your share of the pool and how popular it is. 

On new networks like ZERO, liquidity on DEX is shallow and you can earn higher fees than on older chains. Check the latest APY and stats for pools on ZERO on Reservoir and DODO. Once more people bridge to ZERO and start doing transactions, the demand for swaps will likely increase. In turn, this means more fees for LPs. 

On ZERO Network, providing liquidity is even more attractive because transactions are free. You can add and withdraw liquidity as often as you want to without worrying about gas costs. 

Risks

Providing liquidity is not risk-free: you can lose money to impermanent loss or if something goes wrong with the smart contract. 

Impermanent loss

Impermanent loss happens when the price of the tokens you’ve provided changes significantly compared to when you added them to the pool. If one token appreciates or depreciates sharply, your LP share might be worth less than if you had simply held the tokens. The ideal situation for you as LP is when the prices of both tokens are relatively stable.

On ZERO Network, you can rebalance or exit positions for free (zero gas fees), reducing the impact of impermanent loss.

Smart contract risk 

Any software is susceptible to bugs and potential exploits. 

While ZERO prioritizes security, it’s crucial to understand that all DeFi participation carries some level of risk. Using established DEXes (or their forks, i.e. copies) can be less risky than trying completely new exchanges. However, nothing is ever risk free. 

Now that we got that out of the way, let’s see where you can provide liquidity. 

DEXes on ZERO Network 

Currently, ZERO has two official DEXes: 

• Uniswap V2 fork by Reservoir 
• DODO 

Let’s see how you can provide liquidity on each of these. 

Provide liquidity on Reservoir 

Reservoir deployed an official fork of Uniswap v2 on ZERO Network. 

Reservoir is already integrated in Zerion Wallet swaps on ZERO. So every time some one swaps on ZERO, you can earn.

By providing liquidity, you earn 0.3% fee on all trades proportional to their share of the pool. Fees are added back to the pool in real time. You can claimed fees by withdrawing your liquidity.

Here is how to provide liquidity for ETH-USDC on Reservoir: 

1. Open https://reservoir.app/#/pools/v2 
2. Connect your wallet and make sure you select ZERO Network 
3. Click ‘Add V2 Liquidity’
4. Select ETH and USDC as assets — you need to have both, if you don’t have you can first bridge to ZERO 
5. Click ‘Supply’
6. Confirm and sign a message in your wallet 

Your position will show up in your Zerion Wallet (price tracking is coming soon).

Here is a video showing you the steps to providing liquidity on Reservoir's Uniswap fork on ZERO Network:

Provide liquidity on DODO 

DODO is the first leading DEX to deploy on ZERO Network. 

The are several pools on DODO and the main WETH-USDC. By providing liquidity, you can earn 0.24% (another 0.06% goes to Community Treasury). 

Here is how to provide liquidity for WETH-USDC on DODO: 

1. First wrap some ETH into WETH on app.zerion.io 
2. Open https://app.dodoex.io/pool?network=zero-mainnet 
3. Click ‘Add’ for the pool at the top 
4. Add WETH and USDC in the ratio determined by the pool 
5. Approve both WETH and USDC 
6. Once both approve transactions are confirmed, click ‘Add’ and sign the TX

Once the transaction is confirmed, you’ll see your position on DODO here.

Currently, DODO positions on ZERO are not tracked in Zerion Wallet — this is coming soon. 

To sum up 

Providing liquidity on DEXes on new chains like ZERO can be a great way to earn higher fees. However, it comes with risks of impermanent loss. Luckily, on ZERO transactions are free so you can easily update or remove your positions if the market starts moving to much. 

We’ve also outlined the steps you can take to provide liquidity on Reservoir’s Uniswap fork and DODO. Dive in, provide liquidity, and start earning today!

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