In order for automated market makers (AMMS) to work, people have to create LP Tokens and add liquidity to the Farms.
In this example, I will show you how to create an LP Token and add the Liquidity to the Farm on Mad Meerkat Finance (MMF). Most AMMs look similar and work the same, so if you know how to do it on Mad Meerkat, you know how to do it on most other AMMs.
How to create LP Tokens?
The first thing you have to do to create an LP Token is to connect the Decentralized exchange to your Wallet. Mad Meerkat supports Metamask and Crypto.com DeFi Wallet. There is a “Connect Wallet” Button on the top right of https://mm.finance/.
Once you are connected to your Wallet you have to click on Trade – Liquidity and then “Add Liquidity”.
Let’s say you want to create the LP Token CROISSANT-MMF. In order to do that, you must have CROISSANT and MMF in your Wallet.
If you have both Tokens that are needed, you can create the LP Token. Select both Tokens from the Dropdown Menu. In this example, I use MMF and CROISSANT.
After you click on supply, a confirmation window will pop up, so you can review what you will get.
After you click the “Confirm Supply” Button, you will have to confirm the Transaction in your Wallet.
Once you’ve done that, you have created your LP Token. This LP Token is now in your Wallet and you can stake it on any DEX that supports this LP Token.
For instance, I can stake CROISSANT-MMF on Mad Meerkat or https://croissant.games/.
It makes sense to use the AMM with the higher APR. But you may earn different Tokens on different AMMs. On Croissant.games, you will receive CROISSANT for this LP Token and on mm.finance, you will receive MMF. At the time of this writing, croissant.games has a higher APR than MMF.
To stake your LP Tokens at MMF, you simply have to click on Earn – Farms and on “Stake LP”. Creating an LP Token is not enough to earn interest, you have to stake it, after you’ve created it.