# Adding liquidity Providing liquidity (LPing) means depositing two tokens into a pool so other people can swap between them. In return, you earn a slice of every swap fee that pool generates. ![The Pools page on kumbaya.xyz, showing TVL, volume, and pool list](https://1036133404-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FrOI1bPl9o59ZMxH6wevx%2Fuploads%2Fgit-blob-f031bbeb5d60c244e1a75788ff4db4167a70bd2f%2Fpool.png?alt=media) Kumbaya uses **concentrated liquidity** (Uniswap V3-style), so you get to choose the price range your liquidity is active in. That's a powerful tool — but it also means LPing here takes a little more thought than depositing into a vault and walking away. > 💡 New to concentrated liquidity? Start with [**What is concentrated liquidity?**](https://docs.kumbaya.xyz/liquidity/concentrated-liquidity) for the mental model, then come back here. ## The short version 1. Go to [**kumbaya.xyz/#/pool**](https://kumbaya.xyz/#/pool) and click **+ New Pool**. 2. Pick your two tokens. 3. Pick a **fee tier** (most pairs have one obvious choice — see below). 4. Pick a **price range**. 5. Enter how much of each token you want to deposit. 6. Approve and confirm. You now own an NFT representing your position. As people swap through your pool while the price is in your range, fees accumulate inside that NFT. ## Step-by-step ### 1. Pick the tokens Choose the two tokens you want to provide liquidity for. The order doesn't matter — the app sorts them automatically. ### 2. Pick a fee tier Each pair can have pools at four fee tiers: | Fee tier | Best for | | --------- | --------------------------------------------------------------------------------- | | **0.01%** | Stablecoin ↔ stablecoin (USDC ↔ USDT) | | **0.05%** | Major pairs that move closely (WETH ↔ stablecoin, sometimes also stable ↔ stable) | | **0.30%** | Most pairs — the default for "regular" volatility | | **1.00%** | Exotic, low-liquidity, or volatile pairs | If a pool already exists with serious liquidity at one tier, that's almost always the right one to join — that's where the volume is. The app shows you which tiers have existing liquidity. ### 3. Pick a price range This is the most important step. Your liquidity only earns fees when the **current price is inside your chosen range**. * **Tight range** (close to current price) → higher fees per dollar of liquidity, but your position goes "out of range" sooner if the price moves. * **Wide range** → lower fees per dollar of liquidity, but you stay in range longer. * **Full range** → behaves like Uniswap V2 LP. Always earning, always low capital efficiency. A common starting point is **±10% to ±25% around the current price** for major pairs, and wider for volatile or new tokens. > ⚠️ **Out-of-range warning.** When the price leaves your range, you stop earning fees and your position converts entirely to one of the two tokens. That's not a loss in the bug sense — it's how concentrated liquidity works — but it does mean you're now holding 100% of one asset. See [**Managing your positions**](https://docs.kumbaya.xyz/liquidity/manage-positions) for what to do about it. ### 4. Enter your deposit amounts Once you've set tokens, fee tier, and range, the app calculates the ratio you need. If the current price is right in the middle of your range, you'll deposit roughly equal value of each token. If the current price is near one edge, you'll deposit mostly one of them. You can type the amount in either field — the other auto-fills. ### 5. Approve and confirm If this is your first time providing liquidity with these tokens, you'll be prompted to approve each token. Then click **Add Liquidity** and confirm in your wallet. A few seconds later, your **position NFT** appears under **My Positions** on the Pool page. ## Understanding what you own Your position is an ERC-721 NFT that encodes: * The token pair * The fee tier * Your price range (lower tick and upper tick) * The amount of liquidity you contributed You can transfer the NFT, sell it, or use it as collateral elsewhere — but most of the time you'll just hold it and let it accrue fees. ## What you'll see after * **In Range** — the current price is between your bounds, and you're earning fees. * **Out of Range** — the price has moved outside your bounds. You stop earning fees but you don't lose the position. If the price comes back, you start earning again. * **Uncollected fees** — the fees that have accumulated but haven't been claimed. You can claim them anytime without closing the position. See [**Removing liquidity and collecting fees**](https://docs.kumbaya.xyz/liquidity/remove-liquidity). ## A note on impermanent loss If the price moves significantly during your time as an LP, the value of your position can be lower than if you'd just held the two tokens — that's **impermanent loss**, and it applies to all AMM liquidity. Concentrated liquidity *amplifies* it within your range. The fees you earn are what compensates you for that risk. Pick ranges thoughtfully and don't LP what you can't afford to be down on. ## Where to next? * [**Managing your positions →**](https://docs.kumbaya.xyz/liquidity/manage-positions) * [**Removing liquidity and collecting fees →**](https://docs.kumbaya.xyz/liquidity/remove-liquidity) --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. 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