> For the complete documentation index, see [llms.txt](https://docs.squadswap.com/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.squadswap.com/platform/products/liquidity-pool/dynamo-liqudity-pool.md).
# Dynamo Liqudity Pool
In decentralized exchanges (DEX), liquidity pools allow users to deposit two tokens (often at a 50:50 ratio) into a pool to earn passive income. This setup is traditionally based on the Classic V2 model.
At SquadSwap, we’ve developed a new solution to address the main limitation of Classic V2—having a single, fixed fee tier—by introducing **Dynamo Liquidity Pool (Changeable V2).**
### Classic V2 Liquidity Pool
#### Overview
* T**wo-Token Deposit:** Users deposit two different tokens into the pool in equal proportions (e.g., 50:50).
* **Single Fee Tier:** For example, a fixed 0.2% swap fee.
* **Simplicity:** The interface and mechanics are straightforward, allowing users to easily add or remove liquidity.
#### Advantages
* **Ease of Use:** The V2 model is among the simplest to learn and implement.
* **Low Entry Barrier:** Beginner users can quickly adapt and start providing liquidity.
#### Disadvantages
* **Fixed Fee Tier:** Each time we want to offer a more favorable fee rate to users, a new contract must be deployed and each time liquidity providers must migrate their liquidity to this new contract.
* **Limited Flexibility:** It is challenging to quickly adapt to changing competitive or market conditions.
### Dynamo Liquidity Pool (Changeable V2)
Dynamo Liquidity Pool maintains the simplicity of the Classic V2 model while removing the major drawback of a fixed fee tier.
#### How It Works
* **Changeable Fee Tier:** While Classic V2 uses a single, fixed rate, Dynamo can update the fee rate at any time.
* **No Migration Required:** There is no need to deploy a new contract, so users do not have to migrate their liquidity. (Except for the first migration. When we roll out the new feature, liquidity providers must migrate their existing liquidity to the new contract once.)
* **Unclaimed Rewards Remain Intact:** Any rewards accumulated before the fee tier change stay the same (collectible as before). After the update, new rewards are calculated based on the new fee rate.
#### Advantages
* **Flexibility and Competitive Edge:** The fee rate can be increased or decreased according to market conditions.
* **Preserved Simplicity:** The user-friendly nature of Classic V2 largely remains.
* **Continuous Liquidity:** Since there is no new contract or migration process, the total locked value in the pool remains uninterrupted; users avoid extra transactions and gas fees.
#### Benefits for Users
* **Potential for Higher Trading Volume:** Offering a lower fee rate can attract more traders and aggregators, leading to increased overall fee revenue.
* **Effortless Updates:** When the platform adjusts the fee tier, users in the pool do not need to take any additional action.
#### Fee Tier Boundaries
For the Dynamo Liquidity Pool (Changeable V2), the minimum and maximum fee rate boundaries are as follows:
* **Minimum Fee Tier:** 0.0001%
* **Maximum Fee Tier:** 10%
This range allows the platform to stay competitive under various market conditions while still offering sustainable return rates for liquidity providers.
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