> ## Documentation Index
> Fetch the complete documentation index at: https://docs.boltliquidity.io/llms.txt
> Use this file to discover all available pages before exploring further.

# Provide Liquidity

> How liquidity providers earn fees through Bolt's Execution Rail: single-sided deposits, convergence pricing, hedged inventory, no impermanent loss.

## Current status

<Note>
  Bolt's LP program is being expanded. Specific fee rates and deposit terms are being finalized. Contact the team for current details.
</Note>

## The problem with traditional LP

Traditional AMMs ask liquidity providers to do two jobs at once: discover prices and provide settlement capital.

To do that, LPs deposit paired assets into pools where pricing is determined by a bonding curve. As markets move, the pool automatically rebalances its asset ratio, leaving LPs with more of the depreciating asset. This is <Tooltip tip="The loss LPs incur when the pool automatically rebalances asset ratios as prices move, leaving them with more of the depreciating asset.">impermanent loss</Tooltip>, which for volatile pairs is estimated to cost [5–11% per year](https://a16zcrypto.com/posts/article/lvr-quantifying-the-cost-of-providing-liquidity-to-automated-market-makers/).

Because capital is responsible for both pricing and settlement, LPs also manage price ranges, absorb rebalancing costs, and keep capital locked in the pool regardless of whether it is actively settling trades.

## Why there is no impermanent loss

In traditional AMMs, the pool rebalances through the pricing curve. When the price of an asset moves, the pool ratio shifts and LPs absorb the difference. The curve is the pricing mechanism, and impermanent loss is the cost of that mechanism.

In Bolt, pricing is decided upstream. The pool settles at the convergence price, not at a curve-derived price. Directional exposure is hedged externally. The assets in the pool do not rebalance based on price movement. They cycle through the settlement-hedging loop.

Traditional AMMs pay LPs to do two jobs at once: price the market and provide settlement capital. Bolt separates those responsibilities. The Convergence Engine prices the market. LP capital settles trades. Once capital no longer has to discover price, it can be deployed far more efficiently.

<Check>
  In Bolt, LPs are no longer being paid to price markets. They’re being paid to settle markets.
</Check>

## How Bolt LP works

In Bolt's architecture, pools are settlement infrastructure. Pricing is decided upstream by the <Tooltip tip="Builds a fair price from a cross-venue composite, forecasts its near-term path, and posts one executable convergence price onchain.">Convergence Engine</Tooltip>. Pools execute trades against the committed price. This changes what liquidity providers are paid to do.

<Steps>
  <Step title="Deposit">
    Make a deposit into an <Tooltip tip="Bolt's onchain smart contract that validates prices and settles swaps through the liquidity pool.">Outpost</Tooltip> pool. No paired asset requirement. No price range to configure. Deposit your chosen asset(s) and your capital is ready to settle swaps.
  </Step>

  <Step title="Settlement">
    Deposited liquidity settles swaps at the <Tooltip tip="The near-future fair price Bolt may lean toward when short-horizon signal is strong enough. Falls back to the composite when it is not.">convergence price</Tooltip>. Every settled swap generates fees. You earn proportionally to the volume settled through your capital.
  </Step>

  <Step title="Hedging">
    Directional market exposure is managed through hedging infrastructure rather than passed to LPs.
  </Step>

  <Step title="Fee accrual">
    Fees accrue on every swap settled through your liquidity. No impermanent loss. No rebalancing cost. Capital stays in the pool and generates fees from every trade it settles.
  </Step>
</Steps>

## Comparison

| Dimension          | Traditional AMM LP             | Bolt LP                               |
| ------------------ | ------------------------------ | ------------------------------------- |
| Price management   | Active range management        | None required                         |
| Impermanent loss   | Yes, increases with volatility | None, hedged externally               |
| Returns driver     | Pool volume and fee tier       | Swap throughput and settlement volume |
| Rebalancing        | LP absorbs cost                | Hedging infrastructure handles it     |
| Capital efficiency | Low, most capital idle         | High, turnover rates of up to 100x    |

***

<CardGroup cols={2}>
  <Card title="Capital Efficiency" icon="coins" href="/capital-efficiency">
    How convergence pricing decouples execution quality from capital depth.
  </Card>

  <Card title="Contact the Team" icon="envelope" href="/contact">
    Current details on LP participation and fee structures.
  </Card>
</CardGroup>