Liquidity Provider (Long Farmer)
Liquidity providers will provide equal amounts of nAssets and $USDC to liquidity pools on Nasdex. In return they will receive LP tokens representing their share of assets in the respective liquidity pool.
Providing liquidity on a tokenized stock gives you a long position in that stock on 50% of your capital. This is a much less volatile position as compared to opening a long position with 100% of your capital. Such a position might be less beneficial on the upside, but it also covers your losses on the downside. Providing liquidity is subject to impermanent loss, which is the loss occurred when the price ratio of the 2 assets in the liquidity pool diverge. Price of asset A goes up 2x against asset B = 5.74% Impermanent loss Price of asset A goes up 4x against asset B = 20% Impermanent loss Price of asset A goes down 50% against asset B = 5.72% Impermanent loss Price of asset A goes down 75% against asset B = 20% Impermanent loss To experiment with more scenarios when the prices of both assets in the liquidity pool diverge refer to this calculator created by dailydefi https://dailydefi.org/tools/impermanent-loss-calculator/ Providing liquidity has its benefits as well, liquidity providers earn a swap fee, whenever a trader trades against the pool they provided liquidity on. In addition, liquidity providers will also earn $NSDX tokens through the $NSDX liquidity mining programme, when they stake their LP tokens on NASDEX.