Liquidity Pools (LPs)

Updated by Matt G.

Investing in liquidity pools can be profitable and safe by following simple guidelines. Stablecoin/Altcoin LP might be the kind of risk you need in your life.

silver and gold round coins in box

Liquidity pools (LPs) are known as smart contracts. These are pools that hold 1 or more tokens or coins in one pool. This pool is created by users like you and me, by giving our funds/money/tokens to the pool in a set ratio. A typical ratio is 50/50, meaning that you will give for example USDC the same amount you give AVAX (aka USDC-AVAX LP). If you browse DeBank long enough, you'll see some people invest in triple or quadruple LPs, usually all the Stablecoins combined.

Stats

  • Decide what kind of banker you want to be; safest methods ranked imo:
    1. Invest in Stablecoin Token LP
    2. Invest in Single Asset Farms
    3. Invest in Network FarmsJOE-AVAX (Avalance)
      • *-BNB (Binance)
      • MATIC-* (Polygon)
    4. Invest in non-Stablecoin Farms (aka, Degen investing) that include Altcoins (aka Shitcoins)
  • When trading happens, fees are generated and the fees will be given to the LP owners
  • The more TVL (Total Value Locked) liquidity a pool has the more likely people will participate in the pool and lower the APY.
    • If to many people dump into your favorite LP, you might not be able to exit with locked profit.
    • If the project / protocol is a very good one, none of this matters because people will believe and continue to invest.
  • Being able to accumulate in LP projects that you are ALSO about to pre-fund IPO is a very magical thing… especially if the project does very well!
    • This is why Launchpads are very profitable, you can jump into the infancy stage of any project and dump it for profit quickly.
  • Investing in high-quality projects like AVAX usually give guaranteed profit because for them to fail would take a great deal of bad luck, so consider AVAX to be part of your LP ratio.

When investing in a Liquidity Pool, only try to provide money in pools that go up regarding tokens value. Be certain that your Token will goes up in value. For example, I like what the YieldYak team are doing, and I love what TraderJoeXYZ is doing… so I'm more inclined to invest in Network Farms related to very rich projects like TJ, YY and others.

If Liquidity Pool Goes To Zero

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