Overview for Liquidity Providers
Provide liquidity to Klima’s kVCM pools to support market infrastructure, earn trading fees on Aerodrome, and unlock additional protocol incentives.
Liquidity Pools Overview
All carbon is exchanged with the Protocol via the kVCM token.
The Protocol must ensure ample liquidity is available in the kVCM token pairs — doing so ensures that users can enter and exit the system efficiently, at size, and without incurring slippage.
To achieve this, the Protocol incentivises Liquidity Providers to contribute TVL to its token pairs, in two main pools:
kVCM / USDC: a stablecoin pairing, that allows all users to enter or exit the ecosystem.
kVCM / K2: a protocol token pairing, allowing users to enter or exit the K2 governance token via kVCM.
A Liquidity Provider can be anyone who holds the two tokens provided in the pairing.
Klima hosts its liquidity on Aerodrome's infrastructure. Aerodrome is the leading decentralised exchange on the Base network.
Participating in Liquidity Pools
Users who wish to provide liquidity and earn trading fees and/or protocol incentives can do so in two ways.
1. Provide Liquidity on Aerodrome Only
Users may supply liquidity directly on Aerodrome by following its standard user journey. This can be done without interacting with the Klima Protocol.
Users who do so will be eligible to capture a portion of Aerodrome's trading fees.
kVCM / USDC Pool:
The pool charges a 0.3% fee on every trade.
Liquidity providers receive 90% of these fees.*
Example: If you supply 10% of pool liquidity and the pool generates $1,000 in weekly fees, you earn $90.
kVCM / K2 Pool:
The pool charges a 0.1% fee on every trade.
Liquidity providers receive 90% of these fees.*
Example: If you supply 10% of pool liquidity and the pool generates $1,000 in weekly fees, you earn $90.
Note: this assumes user positions on Aerodrome are not "staked". User positions on Aerodrome that are staked will receive 100% of trading fees, denominated in Aerodrome's native token $AERO instead of the principal deposit tokens. Learn more.
2. Provide Liquidity Through the Klima Protocol
Users may stake deposited but "unstaked" Aerodrome liquidity position into the Klima Protocol. The position will be locked at Klima's standard maturities.
These positions become eligible for protocol-native incentives paid in K2 and kVCM (see Yield & Governance Handbook).
They will also continue to accrue the trading fees via Aerodrome.
This route is suited to users seeking both trading fees and Klima Protocol incentives.
Summary:
Trading fees are claimable via the Aerodrome UI.
Klima incentives are claimable via the Klima dashboard.
Incentive distribution follows the rules outlined in the Protocol’s Whitepaper.
Risks
Providing liquidity involves several risks, including:
Token price volatility: The value of assets in the pool may rise or fall.
Impermanent loss: LPs may incur losses if the relative prices of pooled tokens diverge significantly.
Smart contract risk: Liquidity is managed by open-source smart contracts deployed on Base.
Market risk: Trading volumes, incentives, or pool depth may change over time.
As with all markets, participants should understand these risks before providing liquidity.
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