> For the complete documentation index, see [llms.txt](https://chi-protocol.gitbook.io/chi-docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://chi-protocol.gitbook.io/chi-docs/chi/liquidity-provision-in-chi.md).

# Liquidity Provision in CHI

Providing CHI Liquidity

## Real Rewards to CHI/ETH LPs 

{% hint style="success" %}
Unlike traditional liquidity pools where incentives are typically paid out in governance tokens, **Chi Protocol allows users to stake their CHI/ETH LP tokens and earn native staked ETH rewards directly from the protocol’s reserves, in addition to trading fees generated from trading volumes.** This dual reward structure enhances the overall yields for liquidity providers, offering both staked ETH rewards and trading fee income.
{% endhint %}

{% hint style="success" %}
**As of today's date, 80% of the LST and LRT rewards generated by the protocol's reserves are allocated to CHI/ETH LP Stakers.**
{% endhint %}

<figure><img src="https://679438959-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FWSJjW0RbNohJTdo1T9uY%2Fuploads%2FncxBl5QUmdOoRl53n9AI%2FFrame%202095584722.png?alt=media&amp;token=a0518aac-14c8-4582-8c38-93a0dd376488" alt=""><figcaption><p>CHI/ETH LP Rewards</p></figcaption></figure>

The current allocation of rewards directed to CHI/ETH LPs is 80% of the total yield generated by the stablecoin reserves. This substantial allocation incentivises liquidity providers by offering them the largest share of the protocol's yield, making it a highly attractive option for those contributing to the liquidity pool.

{% hint style="info" %}
Rewards in stETH and weETH are distributed every second, and users must manually claim them to receive their earnings. This ensures that stakers can collect their rewards at their convenience.
{% endhint %}

{% hint style="info" %}

#### Example

Suppose the protocol's reserves are worth $5 million, and the average annual yield of the protocol's LSTs and LRTs is 3%. This means the protocol is currently generating $150,000 in yearly rewards from the USC reserves. CHI/ETH LP stakers are entitled to:

* **$120,000** to CHI/ETH LP Stakers (80% of $150,000)

By providing liquidity in the CHI/ETH pool, users benefit significantly from the growth in the protocol's reserves. This strategy not only benefits from the increase in Total Value Locked (TVL) but also offers a substantial and predictable stream of rewards, enhancing the stability and profitability of users' positions within the protocol.
{% endhint %}

{% hint style="success" %}
Note that USC/ETH LP stakers are also entitled to receive additional CHI rewards. This adds another layer of incentives, boosting the overall yields for liquidity providers within the protocol.
{% endhint %}

## CHI/ETH LP Staking Rewards Distribution

Assuming that within a given timestamp, 1 stETH, 1 weETH, and 1 CHI are distributed, CHI/ETH LP stakers would be entitled to a portion of these rewards based on their stake in the liquidity pool. Specifically:

<figure><img src="https://679438959-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FWSJjW0RbNohJTdo1T9uY%2Fuploads%2FiVuyeb14eUermps3XEpy%2FFrame%202095584725.png?alt=media&amp;token=a074e490-b157-4c95-a3de-0405629fcbc4" alt=""><figcaption><p>CHI/ETH LP Rewards Distribution</p></figcaption></figure>

## CHI/ETH LP APR Calculation

<figure><img src="https://679438959-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FWSJjW0RbNohJTdo1T9uY%2Fuploads%2FDL3YRByw7HqXlvp6T9dl%2FCentre%20Frame.png?alt=media&amp;token=b25c14bf-c0dd-4c60-a538-da50fe472af6" alt=""><figcaption><p>Staked USC/ETH LP APR</p></figcaption></figure>

{% hint style="info" %}
Note that the current rewards are measured and distributed every second.
{% endhint %}

[More on Sustainable Reward Sources](/chi-docs/concepts/sustainable-reward-sources.md)\
[More on APR Formulas ](/chi-docs/resources/apr-formulas.md)