Jan 13
Bifurcated LP Tokens and their advantages
Usually, every AMM allows users to deposit one or more tokens to provide liquidity. To represent a user’s liquidity position, these AMMs mint either ERC20 tokens or ERC721 tokens. These tokens account for the tokens been deposited to the liquidity pool as a whole.
For example, User-A providing ETH & USDT to an ETH-USDT pool would get an ETH-USDT LP ( ERC 20 ) token to represent his or her liquidity position. In more unique AMMs where even single token liquidity is possible, User-A gets a unique ETH-USDT LP token ( ERC 721 ). This means in either case if he/she wants to modify his position he will need to exit from the current position and create a new one.
YNOT finance provides two-LP tokens to represent each of the tokens provided as liquidity to the pool. This opens a door to flexibility for liquidity providers. Liquidity providers can now open single token liquidity as they just need to own one of the two-LP tokens minted for the liquidity positions. They can always switch from single token liquidity to two tokens liquidity by owning both the LP tokens.
USER-A providing just ETH to ETH-USDT pool get ETH LP token while User-B providing USDT to ETH-USDT pool gets USDT LP token, this means if a user starts with single token liquidity or even with 2 token liquidity he can update the position by selling or buying new LP token.
A secondary market to buy/sell LP tokens ease things up for liquidity providers as they can change the direction of their liquidity as and when the market changes, this allows them to maximize their profit throughout the market cycle.
https://ynotfinance.medium.com/ynot-finance-introduction-8253d4bc0242
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