Though ARCX is a governance token, it is important for there to be enough of it 'liquid' (readily exchangeable) on the Ethereum network so that it can be more easily acquired with ETH and not have its price suffer badly from volatility spikes.
Because ARCX is focusing on identity first in its DeFi Passport, it first aims to support and be exchangeable on a decentralized exchanged (DEX). These DEXs work on a automated market-maker (AMM) model that requires liquidity to be pooled and profits shared. DEXs are therefore more egalitarian and much for flexible to list the ARCX token than a centralized exchange (CEX). This video provides a detailed introduction on the need for AMMs in crypto, their efficiencies, and their automated processes.
Since AMM liquidity pools open up liquidity providers to potential 'impermanent loss' (IL) and 'inventory loss,' rewarding liquidity providers in ARCX is meant to avoid these sources of loss. This twitter thread (1/19) provides a brief introductions to these sources of loss.
Sushiswap is originally a fork of Uniswap focused on egalitarian profit distribution and decentralized governance. The ARCx DAO is focused on embracing decentralization and community, so Sushiswap was chosen as the first DEX to incentivize. This video provides a detailed explanation of all of the features of Sushiswap, which ARCX would hope to leverage in the near future.
ARCX is incentivizing liquidity providers to the Sushiswap ARCX/ETH pool (done on Sushiswap's user interface) with a high-yield farm (on ARCX's user interface). This process is a bit complicated for new users, so it is detailed below with video tutorials by community member @Blaze07 on Discord (Blaze07#9274)
To provide liquidity, your wallet must first have some ARCX token. This can be most readily bought on Sushiswap itself.
Sushiswap allows users to contribute liquidity to any pair in a 50:50 ratio. In exchange, you receive a Sushi LP token (SLP).
You must 'stake' the SLP token in on the ARCx app (separate UI from Sushiswap) directly to receive rewards.