Overview for Liquidity Providers
Users can provide liquidity to support Klima’s market infrastructure and earn rewards for doing so.
Liquidity Pools Overview
Robust liquidity is essential for the Protocol to service demand efficiently, minimise slippage, and maintain smooth entry and exit for all ecosystem participants.
Klima handles carbon pricing and routing internally, meaning it does not rely on external carbon liquidity via order books, AMMs, or OTC venues, for price discovery and execution.
In Klima, liquidity pools therefore refer specifically to the pools involving kVCM and K2 tokens: the assets users acquire to participate in governance or to execute carbon transactions.
There are two liquidity pools that support the ecosystem and that Liquidity Providers can participate in:
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.
Klima hosts its liquidity on Aerodrome's infrastructure. Aerodrome is the leading decentralised exchange on the Base network.
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 (i.e. USDC, kVCM, K2). Learn more.
2. Provide Liquidity Through the Klima Protocol via Aerodrome
Users may deposit an "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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