In the ZSPM model, liquidity providers (LPs) are temporary counterparties. During trading or settlement, they passively adjust their positions to be opposite to the users' trading directions to maintain the same size.
LPs benefit from four sources: token liquidity rewards, transaction fees, funding fees from passive positions, and the potential profits or losses from these positions.
Token rewards are settled daily and increase with the duration and amount of liquidity provided. Transaction fees are first used for offsetting. For more information, please refer to the transaction fee allocation section.
LPs face net open positions and liquidation risks due to utilizing liquidity. Using prudent leverage and hedging strategies to mitigate these risks is recommended.
