Liquidity pools
Liquidity pools are used to supply liquidity to Decentralized EXchanges (DEX). Users can lock cryptocurrencies in a smart contract and get rewarded in the form of trading fees that traders pay while they use the DEX.
Complexity
To take part in liquidity pools you have to understand how decentralised exchanges work and what the markets will do in the long run. This is more complex than accessing normal exchanges.
Time
After setting everything up the liquidity pools make passive income based on the numer of trades that use the pool.
Liquidity pools
Complexity
Time
Risk
Profitability
Risk
The main risk is in the devaluation of the cryptocurrencies in the liquidity pool. Some other risks are contract bugs and protocol insolvency, which don’t happen often.
Profitability
The profitability depends on the increase or decrease of the value of the locked cryptocurrencies, and it depends on the DEX’s trading activities. If the locked cryptocurrencies go up in value and the DEX is used a lot this method can be very profitable as you’ll end up with more tokens which have all increased in value.
Liquidity pools offers
EarnCrypts is working on an overview of places to join liquidity pools.
