Why the liquidity provider has to withdraw his liquidity to claim the fees from the pool? If the liquidity providers withdraws his liquidity he might consider to move his funds out of xexchange. Wouldn’t it be more efficient if the liquidity provider could claim his liquidity pool rewards weekly, the same way he can claim his farm rewards without withdrawing his liquidity?
No that would be less efficient. If the rewards are added live to the pool (as is the standard in all DEXes), they are essentially being autocompounded for you (reinvested into the pool).
This increases your capital efficiency, increases liquidity on the token pair (on the pool) and the user also doesn’t have to think about claiming it every so often.
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The way AMM liquidity pools work is that all the trading fees that are distributed to liquidity providers are priced into the liquidity pool token you receive when adding liquidity. Basically, when you create a position in a liquidity pool, you would receive some LP tokens amount that represents your share of the tokens from the liquidity pool. This share will incorporate all the trading fees that are distributed to liquidity providers form that pool.
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Ok I get it now. Basically “fees added to the pool in real time” means they are auto compounded automatically. Thanks.
Is that correct @claudiu-lataretu ?
Yes, you can think that the rewards are autocompounded
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That sounds great, thanks.