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

# Liquidity Provider Rewards

### <mark style="color:purple;">Overview</mark>

The LP rewards of Chaintools come from eight different sources, paid in both ETH and $CTLS. We are the first protocol to utilize the Uniswap V3 `donate function`. It allows the reward amounts to be split proportionally towards liquidity providers with active positions in range of the current price. There is a 0% tax on adding liquidity and 5% on LP removal.

### <mark style="color:purple;">Rewards</mark>

The rewards are added on top of the default 1% pool swap fee.

To bootstrap the liquidity, additional tokens are issued and will be as given as rewards to Liquidity Providers over time.

A portion of the service fees gathered from all utilities will be used to buyback and burn tokens, to add a deflationary aspect to the protocol.&#x20;

&#x20;For more information check the flowchart below:

<figure><img src="https://2123287246-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FYIXqWxu1diSxIyyczOev%2Fuploads%2FO7TakgTb2q9kUPAhVzty%2FLP%20rewards.jpg?alt=media&amp;token=410456c9-5d9e-4298-b51e-045fac27aa7e" alt=""><figcaption></figcaption></figure>