# Calculating LP Rewards — Simplified
**URL:** https://ghostforum.org/t/calculating-lp-rewards-simplified/44
**Category:** ghostDAO
**Tags:** mordor, guide
**Created:** [March 22, 2026, 4:47pm UTC](https://ghostforum.org/t/calculating-lp-rewards-simplified/44 "2026-03-22T16:47:56Z")
**Posts on this page:** 4
**Page:** 1
### Author:  [@StarkProtocol](https://ghostforum.org/u/StarkProtocol)
#### Post date: [March 22, 2026, 4:47pm UTC](https://ghostforum.org/t/calculating-lp-rewards-simplified/44/1 "2026-03-22T16:47:56Z")
I’ve learned a unique quirk about liquidity pools and wanted to share what I’ve figured out.
How are LP rewards actually calculated, and what drives profit?
I used Blockscout to estimate the size of the liquidity pool on Mordor and determine what percentage of it I own. It turns out I’m sitting on about **57% of the pool** — but I wasn’t seeing meaningful rewards.
So I dug into the formulas (from the blog) and ran them through AI to better understand what’s going on. Here’s the simplified version:
> **LP Profit ≈ DEX Fees − Impermanent Loss**
Now here’s the counterintuitive part:
**Impermanent loss increases when price moves — even if the token goes up.**
At first, that doesn’t make sense. You’d think if the token price increases, LP holders should benefit. But that’s not how AMMs work.
As a liquidity provider, you’re constantly being rebalanced by the AMM:
- When price goes up → the pool sells your appreciating token
- When price goes down → the pool buys more of it
This keeps the pool balanced, but it means:
👉 You’re effectively **selling winners and buying losers automatically**
That rebalancing is what creates **impermanent loss**.
Yes, you earn a portion of DEX fees from every swap — but:
> If **fees \< impermanent loss** , you’re not actually making money.
* * *
**Key takeaway:**
👉 Liquidity pools _hate volatility_
👉 Liquidity providers need **consistent volume** , not wild price swings
* * *
**So what actually makes money in a liquidity pool?**
**Volume.**
High, steady trading activity (with relatively stable prices) is where LPs finally start to profit.
* * *
**Reality check (Mordor):**
From what I can see on Blockscout:
- Only ~1–2 swaps per day
- Very low trading volume
At this level of activity:
👉 There simply aren’t enough fees being generated
👉 LP providers are unlikely to see meaningful rewards
* * *
If anyone sees this differently or has additional data, I’d love to compare notes — still learning this space.
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### Author:  [@JMLFreed0m](https://ghostforum.org/u/JMLFreed0m)
#### Post date: [May 8, 2026, 8:07pm UTC](https://ghostforum.org/t/calculating-lp-rewards-simplified/44/2 "2026-05-08T20:07:48Z")
volume is key for ghost chain rewards and LPs…
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### Author:  [@JMLFreed0m](https://ghostforum.org/u/JMLFreed0m)
#### Post date: [July 22, 2026, 2:33pm UTC](https://ghostforum.org/t/calculating-lp-rewards-simplified/44/3 "2026-07-22T14:33:12Z")
so when it is the best time to create liquidity pools……after token appreciates and there is steady dex trading volume? It seems its more risky to create liquidity pools early if the rewards skew to impermamanet loss.
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### Author:  [@gozerthegozerian](https://ghostforum.org/u/gozerthegozerian)
#### Post date: [September 30, 2026, 8:56pm UTC](https://ghostforum.org/t/calculating-lp-rewards-simplified/44/4 "2026-09-30T20:56:27Z")
You could say it’s more risky, but there is greater opportunity as well, because there are fewer LPs providing liquidity, and you can own a higher percentage of the swap fees, especially when the protocol on liquidity is very low, like in the launch of a new GhostDAO when the protocol’s own liquidity will be very low. When it’s real money, you will have a lot of trading activity with the volatility. Some will be in the money when others are out of the money, et cetera. When the ecosystem relaunches on V7 testnet with the new GhostDAO’s, it’ll be a great chance to test competing rates of return across the ecosystem.
But in general, providing LP volume is a great longer-term strategy, but a poor short-term strategy, unless you’re very closely watching impermanent loss and have a very active strategy.