# Overview for Liquidity Providers

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Providing liquidity is a voluntary activity to support market operation. Liquidity provision is not an investment product and does not guarantee returns.
{% endhint %}

### **Overview**

All carbon interactions within the Klima Protocol are mediated via the kVCM token.

To support efficient access and execution, liquidity is concentrated in two primary trading pairs:

* **kVCM<>USDC:** a stablecoin pairing that allows all users to enter or exit the ecosystem via dollar denominated settlement assets.&#x20;
* **kVCM<>K2:** A protocol-token pair enabling conversion between kVCM and K2.

Liquidity for these pairs is hosted on [**Aerodrome**](https://aerodrome.finance/) a decentralised exchange on the Base network.&#x20;

Any user holding the assets required for a given pair may provide liquidity.

#### **1. Provide liquidity on Aerodrome only**

Users may supply liquidity directly via Aerodrome’s standard interface without interacting with the Klima Protocol.

Liquidity providers receive a pro-rata share of trading fees generated by the pool.

**kVCM<>USDC Pool:**

* **0.3% fee** per trade.
* 90% of fees distributed to liquidity providers (for unstaked positions).<sup>1</sup>

*If a user provides 10% of pool liquidity and the pool generates $1,000 in trading fees during a given period, the user would receive approximately $90, subject to pool mechanics and position status.*

**kVCM<>K2 Pool:**

* 0.01% fee per trade
* 90% of fees distributed to liquidity providers (for unstaked positions)

<sup><sub>1<sub></sup> <sub></sub><sub>This assumes user positions are</sub> <sub></sub><sub>**not “**</sub><sub>staked</sub><sub>**”**</sub> <sub></sub><sub>on Aerodrome</sub><sub>**.**</sub> <sub></sub><sub>User positions that</sub> <sub></sub><sub>**are**</sub> <sub></sub><sub>staked on Aerodrome will receive 100% of trading fees, denominated in Aerodrome's native AERO token instead of the principal deposit tokens, according to Aerodrome's own rules.</sub> [<sub>Learn more.</sub>](https://aero.drome.eth.limo/docs)

#### **2. Provide Liquidity Through the Klima Protocol**

Users may deposit eligible, unstaked Aerodrome LP positions into the Klima Protocol:

* Deposited LP positions remain on Aerodrome.
* Trading fees continue to accrue according to Aerodrome’s mechanisms.
* Deposited positions may become eligible for protocol-defined incentives, subject to predefined lock conditions and standard durations.

Summary:

* Trading fees are claimed via Aerodrome.
* Protocol incentives (if applicable) are claimed via the Klima interface.
* Incentive distribution follows deterministic, rule-based logic.
* Participation does not confer ownership rights, profit-sharing rights, or claims on protocol-held carbon.

***

### **Risks**

Providing liquidity involves material risks, including but not limited to:

* **Token price volatility:** Asset values may rise or fall.
* **Impermanent loss:** Divergence in token prices may reduce the value of a liquidity position relative to holding the assets separately.
* **Smart contract risk:** Liquidity positions rely on open-source smart contracts deployed on Base.
* **Market risk**: Trading volumes, liquidity depth, and incentive conditions may change over time.
* **Regulatory risk:** Participation may be subject to jurisdiction-specific requirements.

Participants should carefully assess these risks before providing liquidity.


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