The Liquidity tool can be used by liquidity providers to pool liquidity using existing pools, or to create new liquidity pools for new token pairs.
This is one of the most important elements of any AMM protocol, and although Fusion has its own list of whitelisted and officially supported tokens, custom tokens are also supported. Users can add liquidity and create new pools for custom tokens using their smart contract addresses.
Every time a user provides liquidity to a token pair, the protocol rewards them with Nova Liquidity Tokens (NLTs). These tokens can be perceived as a form of receipt that can be used to redeem the tokens paired in a given liquidity pool. NLT tokens can be transferred to other wallets and deposited into other protocols, and users need to be extremely careful when doing so, because without the NLT tokens there is no way for the liquidity provider to withdraw their pooled liquidity, and with Fusion being a decentralised protocol, Nova Network cannot assist on recovering these tokens in case they are lost, stolen, or transferred to another user by mistake.
In order to add liquidity to a pool, users need to hold both tokens that the pool is comprised of. Users are able to determine the exact amount of liquidity they want to provide, and generally the liquidity cap will be determined by the users' lowest token holding units relative to the current market pair ratio.
While adding liquidity to existing pools users will be subject to the current ratio, or market price, of the pair.
Users can add custom tokens and pool liquidity using their smart contract addresses. When creating new pairs, the pool creator will have to determine the ration of the two tokens being paired, which will then determine its price.