FAQ: Investing / Providing Liquidity
- How does CompliFi generate a return on my investment?
CompliFi uses your liquidity to issue and trade a variety of derivatives.
When traders buy derivatives from CompliFi, the protocol uses your liquidity to collateralise these positions and takes the opposite side of each trade. In return, traders pay transaction fees. Your investment return consists of the fees collected from traders, plus net performance of derivative positions the pool takes onto its balance sheet.
- Can I provide liquidity with a single token, or does it need to be paired?
All CompliFi pools operate on single-sided liquidity.
- Do I receive an LP token when providing USDC liquidity?
Yes. Each pool investor has a claim to a share of the combined value, proportional to the number of pool share (LP) tokens they hold.
- How often do CompliFi pools pay out, and can I redeem my full investment in one go?
Value accrues to your LP position continuously and can be freely redeemed at any time and in any amount.
When a large share of the pool's liquidity is backing issued derivatives, your redemption request may be queued and processed automatically as soon as liquidity gets unlocked.
The maximum waiting time for the USDC pool is currently 24h. For non-USDC pools, the maximum time is 2 weeks
- What are the risks involved in providing liquidity to CompliFi?
CompliFi pools serve as counterparties to derivative traders, and as a result take on market risks. CompliFi uses onchain algorithms to manage and limit these risks, but it can still happen that a large group of traders makes significant winning bets at the expense of the pool.
- Are pool APYs subsidised?
No, APY is generated purely from the product itself.
- How do I interpret the Pool Performance Index?
Pool performance index is simply a normalised LP token price chart. At the start of the chosen period, the index starts at 1 and then changes at the same rate as LP token value.