Using Mezo Pools
Providing liquidity on Mezo Pools enables you to earn trading fees and mats emissions while deepening the market for Bitcoin-backed assets. This guide walks you through the complete process.
Prerequisites
Before you begin, ensure you have:
- A compatible wallet connected to Mezo
- Equal dollar values of both tokens in your desired pool pair
- Sufficient BTC for gas fees
Deposit
To provide liquidity, you need equal value of both assets in a trading pair. For a BTC/MUSD pool, you might deposit 50 worth of MUSD.
Visit mezo.org/earn/pools and select your desired pool. Enter the amount of one token you wish to deposit—the interface automatically calculates the required amount of the second token. Review your estimated LP tokens, confirm the transaction, and approve token spending if it’s your first time. Once complete, LP tokens representing your proportional share are minted to your wallet.
Understanding LP Tokens
When you deposit into a pool, the number of LP tokens you receive is calculated as sqrt(x × y) for the first deposit in a new pool, where x and y are the quantities of both tokens. For subsequent deposits, your LP tokens are proportional to your share of the total pool value.
These tokens represent your ownership of your assets in the pool and entitle you to:
- A proportional share of all trading fees generated by the pool
- mats emissions when staked in the gauge system
- The ability to redeem your underlying assets by burning the LP tokens
Stake
To earn mats emissions, navigate to your position and select “Stake LP Tokens.” Choose your stake amount, confirm the transaction, and your staked LP tokens begin earning mats based on gauge votes from veBTC holders. Trading fees continue to accrue separately and can be claimed anytime without unstaking.
Gauges
Gauges determine how mats emissions are distributed across pools. Each pool has an associated gauge, and every epoch (7 days), veBTC holders vote on which gauges should receive mats emissions. Pools that receive more votes get a larger share of emissions for that epoch.
Pools with higher gauge votes receive more mats emissions, attracting more liquidity, which reduces slippage and increases trading volume. Higher volume generates more fees for LPs, creating a positive feedback loop across the ecosystem and aligning interests of LPs, voters, and traders.
Manage
You earn from two sources as an LP:
Trading Fees
- Volatile Pools: 0.30% per swap
- Stable Pools: 0.05% per swap
- Collected in both tokens of the pair
- Stored separately in PoolFees contracts
- Claimable anytime without unstaking
mats Emissions (When Staked)
- Earned based on veBTC holder votes on gauges
- Distribution amounts determined by community governance
Claim
Claiming fees: Navigate to your position, click “Claim Fees,” and both tokens are sent to your wallet. You can claim fees without unstaking your LP tokens.
Claiming mats: Click “Claim Rewards” from your staked position to receive your earned mats.
Withdraw
Unstaking: Select “Unstake,” enter the amount, and confirm. Your LP tokens are returned to your wallet and stop earning mats emissions, but trading fees continue to accrue.
Removing liquidity: Unstake your LP tokens first if needed, then click “Remove Liquidity” and confirm. Your LP tokens are burned and both underlying tokens are returned proportionally to your wallet.
Risks
Impermanent Loss
Providing liquidity exposes you to impermanent loss—when the price ratio between your tokens changes, you may have less value than simply holding both tokens. Volatile Pools like BTC/MUSD carry higher impermanent loss risk than Stable Pools like MUSD/USDC.
Smart Contract Risk
Mezo Pools are audited, but smart contracts always carry inherent risk. Review audits at mezo.org/audits and only deposit amounts you’re comfortable with.