I'm trying to understand what a sensible value is for the liquidity token (LQT) parameter when calling the Liquidity Baking CPMM.

I'm reading the Dexter docs here, since the CPMM is a fork of the Dexter contract. I understand that I can specify a minimum liquidity token to be minted when calling addLiquidity. In reading these official Dexter docs I have two questions:

  1. What is a reasonable minimum to expect? How can I know what value to send that will still result in the contract accepting my call, but also will not result in me sending essentially free Tezos to the contract for minimal reward? Essentially, how can I validate that I'm getting a good deal?

  2. When I call removeLiquidity to redeem my LQT, do I know how much Tezos and tzBTC I will receive for my. LQT? Basically how do I know the exchange rate at time of liquidity removal?

1 Answer 1

  1. One way to think about it is to think about how many lqt would be minted if the transaction hit the contract in its current state and allow for some slippage. For example, with 10% slippage, you would let minLqt be 10% lower than what you would get if the transaction hit the contract in its current state. The slippage number for this can be quite higher than the slippage one might tolerate for a trade because the user has the opportunity to withdraw the liquidity should they be unhappy with the number of lqt tokens received.

  2. You can't know exactly ahead of time because other transactions might occur before your transaction is included.

  • 1
    Hey thanks Arthur! It's an honor to have the architect of the protocol answer my question.
    – Whirlybird
    Jul 30, 2021 at 23:22

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