Introduction

The Firestarter DEX (Decentralized Exchange) is where you can trade tokens after they have completed their bonding curve launch. It allows you to swap one type of token for another directly from your wallet, without needing a central intermediary.

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Understanding the Swap Interface

Before you trade, familiarize yourself with these key terms in the swap window:

• From: The token you are selling.

• To: The token you are buying.

• Slippage Tolerance: The maximum price change you are willing to accept while your transaction is processed. A setting of 0.5% is standard and protects you from drastic price shifts.

• Price Impact: An estimate of how much your specific trade will affect the token's market price. Larger trades have a higher impact.

• Minimum Received: The guaranteed minimum amount of tokens you will receive. If the price slips beyond this point during the transaction, the swap will fail, protecting your funds.

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Understanding Liquidity Mechanisms

What is a Liquidity Pool?

A liquidity pool is a collection of two tokens locked in a smart contract that allows users to trade between them. On Firestarter DEX, every token has a primary liquidity pool that pairs it with $ANLOG.

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Why Provide Liquidity?

When you add your tokens to a liquidity pool, you become a Liquidity Provider (LP). As an LP, you are helping to create a more stable and efficient market for the token, and in return, you earn rewards.

• Earn Passive Income: You will earn a 0.20% fee on every single trade that happens in the pool, proportional to your share of the pool. These fees are automatically added to the pool in real-time, allowing your investment to grow with every trade. For more details, see "Fee Structure."

• Support Your Favorite Creators: By providing liquidity, you are directly supporting the issuers you believe in, helping them to build a strong and stable economy around their token.

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The Primary Risk

Before you provide liquidity, you must understand the risk of impermanent loss.

• Definition: Impermanent loss is the difference in value between holding two tokens in your wallet versus depositing them in a liquidity pool. It occurs when the price of one token changes significantly relative to the other.

• Scenario: Imagine you deposit $ANLOG and $KRNL into a pool. If the price of $ANLOG doubles on the open market, the pool's automated algorithm will sell some of your $ANLOG for $KRNL to maintain balance. If you were to withdraw your funds at that moment, you would have less $ANLOG and more $KRNL than you started with. The "loss" comes from the missed opportunity of holding the $ANLOG as it appreciated.

• Key Point: The loss is "impermanent" because it is only realized when you withdraw your liquidity. If the token prices return to their original ratio, the loss is erased. However, in volatile markets, the loss can become permanent.

Only provide liquidity if you understand and accept this risk.

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