Liquidity Provider Guide

Everything you need to know about providing liquidity to Kelly4X pools.

What is Liquidity Providing?

As a Liquidity Provider (LP), you deposit tokens into Kelly4X pools that players bet against. When players lose, you earn their bets. When players win, you pay out from the pool. Over time, the 1% house edge ensures the pool grows.

Key Concept

You are the house. Players bet against your liquidity. The 1% house edge means you have a mathematical advantage on every bet, generating sustainable yield over time.

How to Add Liquidity

1. Navigate to Liquidity Page: Click “Liquidity” in the navigation menu
2. Choose Your Token: Select ETH, USDC, or DAI
3. Select Risk Tier: Pick your Kelly multiplier (1x, 2x, 4x, or 8x)
4. Enter Amount: Type amount or click “Max” to deposit full balance
5. Approve Token (ERC20 only): Click “Approve” and confirm wallet transaction
6. Add Liquidity: Click “Add Liquidity” and confirm wallet transaction
7. Receive LP Tokens: You'll receive LP tokens representing your pool share

Understanding Risk Tiers

Kelly4X offers four risk tiers based on the Kelly Criterion. Higher multipliers = higher returns but also higher volatility.

1x Kelly

APY: 8-12%
Risk: Ultra-safe
Max Drawdown: 20-30%
Best for: Stable, predictable returns

2x Kelly

APY: 14-20%
Risk: Moderate
Max Drawdown: 40-50%
Best for: Balanced risk/reward

4x Kelly

APY: 22-35%
Risk: High
Max Drawdown: 60-70%
Best for: Aggressive yield seekers

8x Kelly

APY: 40-60%+
Risk: Extreme
Max Drawdown: 80-90%
Best for: Maximum risk tolerance

How to Remove Liquidity

1. Go to Remove Tab: Click “Remove” tab on Liquidity page
2. Select Pool: Choose token and Kelly tier to withdraw from
3. Choose Percentage: Use slider or type percentage (1-100%)
4. Remove Liquidity: Click “Remove Liquidity” and confirm transaction
5. Receive Tokens: Your underlying tokens will be returned to your wallet

Important Notes

Locked Liquidity: Funds backing active bets cannot be withdrawn until bets settle
Slippage Protection: 1% default slippage protects against price changes
No Lock Period: Withdraw anytime (except locked amounts)

Understanding LP Tokens

LP tokens are ERC20 tokens that represent your share of a specific pool. Each (token, Kelly multiplier) pair has its own unique LP token.

LP Token Features

Transferable: Send LP tokens to other wallets
Composable: Use as collateral in other DeFi protocols (future)
Proportional Value: Each LP token represents equal share of pool
Auto-rebasing Value: Pool value grows as players lose bets

Tracking Your Positions

The Liquidity page shows all your active LP positions in real-time:

LP Positions Tab: View all your positions, ownership %, and current value
LP Activity Tab: See your add/remove liquidity history
Real-time Updates: Positions update as bets are placed and settled

Risk Management Tips

Start Conservative: Begin with 1x or 2x Kelly to understand volatility
Diversify Tiers: Spread liquidity across multiple Kelly multipliers
Monitor Regularly: Check positions daily during high-volume periods
Understand Drawdowns: Higher tiers can lose 60-90% during unlucky streaks
Long-term Mindset: House edge ensures profitability over time, not overnight

FAQ

What happens if multiple players win big?

Pools are designed to handle variance. The Kelly Criterion ensures you never risk more than optimal on any single bet. Over thousands of bets, the 1% edge guarantees profitability.

Can I lose all my liquidity?

Theoretically yes with 8x Kelly during extreme bad luck. Lower tiers (1x-2x) have much lower risk. The protocol limits maximum bet sizes to prevent catastrophic losses.

When do I earn yield?

You earn immediately when players lose bets. Yield accrues in real-time to your LP token share. No claiming required - simply withdraw anytime to realize gains.

What are gas fees?

You pay gas fees for: (1) Token approval (one-time per token), (2) Adding liquidity, (3) Removing liquidity. Gas fees depend on network congestion.