How to Earn in Liquidity Pools

By supplying liquidity into a pool, LPs make money from letting traders use their liquidity for making transactions.

Provider's income consists of:

  1. In-pool fees: 0.2% on each trade. Final amount depends on volumes traded within the pool
  2. Farming (if available): 0.1% daily (or 36.5% yearly) and up. Payouts are regular until the program expires

Earning on In-Pool Fees a.k.a. Liquidity Mining: Example

This money-making strategy is known as liquidity mining. Assume an LP provides 50% of the pool's total liquidity. A trader swaps 1,000 USDTE for 10 HUB, paying a fee of 0.2% on the token sold, i.e. 2 USDTE (1,000/100*0.2). Since the LP has half of the total liquidity, they'd earn 1 USDTE.

Earning in Farming Program: Example

This money-making strategy is known as yield farming. Assume an LP provides 50% of the HUB-USDTE pool's total liquidity and that pool participates in a farming program offering 0.2% in daily rewards, accrued in HUB. The total liquidity of the pool stands at 4,000 HUB, meaning the LP owns 2,000 HUB in liquidity. 0.2%*2,000 HUB=4 HUB, that's the farming reward the LP would get. As a rule, farming rewards are distributed on a daily basis (but this can vary depending on a given program's settings).

This material serves educational purposes only. The information contained herewithin does not constitute an investment, financial, legal, or tax advice, and it is not an offer or solicitation to purchase or sell any financial instrument.