# FAQ

**What are the costs of providing liquidity?**

The costs of providing liquidity can be referred to as divergence loss. Divergence loss refers to the loss LPs incur relative to holding the assets they provide as liquidity. Divergence loss is also known as mark-to-market loss, impermanent loss, or unrealized opportunity cost. It is unavoidable with most asset pairs, but is solvable to an extent for liquid staking and yield-bearing tokens.

**What makes Poolside different?**

Poolside is the only AMM to eliminate the type of loss that liquidity providers incur during rebases and value-accruing events. This makes Poolside optimal for liquid staking tokens like stETH, preventing arbitrage that happens as these assets appreciate relative to ETH.

**How does Poolside eliminate LP losses?**

AMMs have liquidity pools representing the active liquidity that can be traded. Poolside adds reservoirs, which represent inactive liquidity. Typically, after every rebase or value-accruing event, traders can arbitrage value out of the pools. With Poolside, the new tokens or additional value temporarily flow into the reservoirs (inactive liquidity). This allows LPs to retain value in the pool.\
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**What security measures are taken to ensure the safety of user funds in Poolside contracts?**

Statemind has audited Poolside's core contracts and CertiK has audited the wrapper contracts. The protocol has also undergone extensive peer review with DeFi's brightest minds. Additionally, there is an active $500K bug bounty on Immunefi.\
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**How does pricing work in Poolside?**

As with many other AMMs, we use the constant product market maker formula <mark style="color:blue;">`y*x=k`</mark> to price assets.&#x20;

**What asset pairs make sense for Poolside?**

Poolside technically supports any asset. However, the value of our design is best realized when one or two of the paired assets are either rebasing or value-accruing.&#x20;

**How can I become a liquidity provider on Poolside? Why should I?**

LPs can deposit one or both assets to their preferred token pair and receive liquidity tokens. The liquidity tokens represent ownership of the pool. Liquidity tokens earn fees based on the volume of the pool. LPs can also be rewarded with incentives.

**How are fees distributed among liquidity providers and to the protocol?**

On Poolside, 100% of the swap fees accrue to liquidity providers. All pools have a default 0.30% swap fee.&#x20;

**What are the risks of providing liquidity?**

The biggest risk for providing liquidity on AMMs is impermanent loss. While this still happens on Poolside based on market demand, Poolside mitigates a type of impermanent loss for rebasing and value-accruing assets. Other risks include price slippage, smart contract risk, and systemic risks.

**What are rebasing assets?**

Rebasing assets are tokens that have balances that change uniformly across all holders. These balance changes are based on predetermined rules or external factors. Rebasing assets present new opportunities for use as a staking position (stETH), elastic commodity (AMPL), or interest-bearing assets (AAVE aTokens). Rebasing assets also present some challenges. One of those challenges is how rebasing events are handled in existing AMMs. As stated in the [Uniswap docs](https://docs.uniswap.org/concepts/protocol/integration-issues), LPs bear the loss for negative rebases. Poolside solves this and neatly integrates rebasing assets.

