Providing Liquidity
Liquidity providers are the backbone of the Twilight Pool, the settlement layer that powers all perpetual trades on the Twilight network. By depositing BTC or NYKS test tokens into the pool, LPs supply collateral that traders borrow against — earning yield from trading activity, fees, and liquidation profits.
What is the Twilight Pool?
Unlike order book exchanges, Twilight uses a single-sided liquidity pool. All trades settle directly against this pool, meaning there are no counterparties or order matches — only traders and the protocol.
When a trader opens a position:
The pool acts as the counterparty.
Profitable trades are paid out from the pool.
Losses and liquidations flow back into the pool, increasing its value.
This design enables continuous liquidity and deterministic execution without slippage or front-running.
How LPs Earn
Liquidity providers earn yield through three main sources:
Trading Fees
Every position opened or closed generates protocol fees distributed to LPs.
Liquidation Profits
When traders are liquidated, the collateral above debt value is credited to the pool.
Funding/Skew Adjustments
The pool periodically rebalances exposure; positive skew returns may accrue to LPs.
All yields are denominated in BTC, giving LPs direct bitcoin-denominated returns.
🪙 Becoming a Liquidity Provider
Step-by-Step
Navigate to the Lend Page https://frontend.twilight.rest/lend
Connect Your Keplr Wallet Ensure your wallet is connected to the Twilight Testnet and funded with NYKS and BTC test tokens.
Select Asset and Amount Choose the token (BTC or NYKS) you wish to deposit. The available balance will appear automatically.
Confirm Deposit Click Provide Liquidity and approve the transaction in Keplr. Once confirmed, your assets are added to the Twilight Pool.
Track Pool Share After deposit, you receive LP tokens representing your share of the pool. These can be viewed and redeemed anytime from the Lend Dashboard.
Withdrawing Liquidity
To withdraw:
Go to the Lend page.
Click Withdraw next to your active position.
Confirm in Keplr.
Withdrawals return your principal plus accumulated yield (if any) directly to your Funding Account.
⚠️ Liquidity withdrawals are subject to cooldown periods during extreme volatility to protect the pool’s solvency.
Risk & Rewards
Providing liquidity involves exposure to trading outcomes:
If traders profit overall, pool value may decrease temporarily.
If traders lose (liquidations or net negative PnL), the pool accrues gains.
Over time, LPs earn sustainable yield driven by trading volume and risk distribution — similar to market-making returns in traditional derivatives markets.
Transparency & Verification
All pool transactions and yield calculations are publicly verifiable on the Nyks chain. However, individual trader positions remain encrypted on zkOS, ensuring privacy for users while preserving full transparency for LP accounting.
Key Takeaways
LPs supply liquidity to the Twilight Pool, enabling zero-cost leverage for traders.
Returns are generated from trading fees, liquidations, and pool skew adjustments.
LP positions are non-custodial, withdrawable, and verifiable through on-chain data.
All yield is denominated in BTC — providing true bitcoin yield exposure.
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