In return, the liquidity providers receive LP (liquidity pool) tokens that act as a receipt for their share of the pool. These LP tokens are burnt when reclaiming your tokens. You can also provide them to use in yield farming, where your fees are constantly reinvested in the pool to compound your interest.
Udego FInance’s AMM model rewards liquidity providers with a 0.17% fee shared proportionally based on the liquidity provided. The tokens' prices aren't determined via an order book but through a formula known as the Constant Product Market Maker.
Let's use the ETH/DAI liquidity pool as an example. We'll refer to ETH as x and DAI as y. With a Constant Product Market Maker formula, x and y are multiplied together to create a constant, k, that can’t change.
x * y = k
The liquidity pool will offer you a conversion rate, in our case, 3,000 DAI (y) for 1 ETH (x). When you supply the 3,000 DAI to the pool and remove 1 ETH, it will have a higher supply of DAI and a smaller supply of ETH. This action causes the price of ETH to rise as k is constant. In other words, you are using your DAI to buy ETH. As more ETH leaves the pool, its price in comparison to DAI rises.
The liquidity provided to the exchange comes from Liquidity Providers ("LPs") who stake their tokens in "Pools". In exchange, they get FLIP (Udego Liquidity Provider) tokens, which can also be staked to earn UDEGO tokens in the "farm".
When you make a token swap (trade) on the exchange you will pay a 0.2% trading fee, which is broken down as follows:
0.17% - Returned to liquidity pools in the form of a fee reward for liquidity providers.
0.03% - Sent to the Udego Finance Development Treasury.