Providing liquidity to a liquidity pool makes it possible for tokens to be swapped directly on Bridges Exchange. When you provide liquidity to a liquidity pool, you are rewarded by receiving a share of the liquidity provider fees charged on transactions for the particular pair.
When you provide liquidity, you'll get LP (liquidity provider) tokens in return. The number of LP tokens you receive represents your portion of the liquidity pool. When you want to withdraw your liquidity later, you'll simply redeem your LP tokens.
For example, you can deposit Bridge$ and BNB into the liquidity pool, and you'll get LP tokens back. Be aware that the LP tokens from Bridges Exchange will always be called "Bridges LP" in your wallet regardless of which pair they are for.
When someone uses a liquidity pool to swap tokens on Bridges Exchange, they pay a liquidity provider fee of 0.25%. This fee is added back to the liquidity pool and can be withdrawn by the liquidity provider as a reward.
Let's go back to our Bridge$-BNB example and use some simple numbers. Say you deposit 10 BRG.X and 10 BNB token into the liquidity pool, and you get back 10 LP tokens.
This means that 1 LP token = 1 BRG.X and 1 BNB.
Now, someone trades 10 BRG.X for 10 BNB, accruing 0.025 BRG.X. Another person trades 10 BNB for 10 BRG.X, accruing 0.025 BNB. Then the liquidity pool has 10.025 BRG.X and 10.025 BNB.
After these swaps, 1 LP token = 1.0025 BRG.X and 1.0025 BNB.
When the liquidity provider withdraws their liquidity by redeeming their LP tokens, they'll receive more than what they put in thanks to the liquidity fee rewards.
While providing liquidity for BRG.X-BNB, you will still receive your dividends on those tokens in the liquidity pool for the same amount as if you were holding your Bridge$ in your wallet. You can collect your dividends earned on your Bridge$ tokens in the liquidity pool using the Dashboard.
Just like all of cryptocurrencies and DeFi, providing liquidity is not without risk. It is possible that your tokens may lose value, or even that you may be exposed to impermanent loss.