Strategies — AMM/XYK — FAQ

Q: What is an XYK pool?
An XYK pool is a market-making strategy that keeps a 50/50 balance between two tokens (for example, BTC and USDC).

When one token goes up in price, the strategy automatically sells some of it and buys the other, earning small profits from these price movements.

This approach reduces downside risk compared to simply holding the tokens when price goes down, but it also lowers upside gains when price goes up. It’s a powerful tool for people who want steady returns with less volatility.

You can access XYK Pools at https://rujira.network/strategies?filters=BowPoolXyk.

For more details, see the XYK strategy docs: https://docs.rujira.network/strategies#xyk-strategy

Q: How can I open a position?
Go to the Strategies page, filter by XYK, choose a strategy, enter the amount you want to provide, and sign the transaction.

Q: What is impermanent loss?
Impermanent loss (IL) is the reduction in value that happens when the prices of the two tokens you provided to a liquidity pool move apart, leaving you with less total value than simply holding them separately.

Because an XYK pool automatically rebalances to a 50/50 target ratio, it sells some of the token that goes up in price and buys more of the one that goes down.

If prices do not return to where they were when you entered, you end up with more of the underperforming token and less of the outperforming token, making the value of your position lower than if you had simply held the two tokens separately.

If volumes have been good during the period, the fees you generated by providing liquidity should more than offset the IL. If prices come back to their level at the time you opened your position, the IL will be reverted and the trading fees you earned will be pure profit.