Since the rise of DeFi, liquidity pools have become one of the most attractive investments for crypto enthusiasts. Being decentralized exchanges’ bread and butter, liquidity pools guarantee seamless transactions on a DEX, contrary to traditional buyer-seller markets.
Liquidity pools are a trending topic, though some common misconceptions exist. Many people fear losing their assets or those assets depreciating in value. The truth is – yes, every investment brings potential risks – but potential rewards are worth it, and doing your own research and gaining knowledge and insight is a must before depositing assets in a liquidity pool.
This article will go through the top 10 crypto liquidity pools on decentralized exchanges.
1. Curve Finance
The Curve finance protocol offers multiple Ethereum-compatible liquidity pools, particularly for stablecoin pairs. Curve also offers reduced slippage and 7 different pools to invest in. This platform still doesn’t have a proprietary token but it became fully decentralized with the launch of Curve DAO. As far as the APYs go, the best-performing pool is ETH+sET with 14,49% APY.
Balancer was built on Ethereum, and it serves as a non-custodial portfolio manager, source of liquidity, and price sensor mechanism. Rich in liquidity pools, Balancer offers many different options such as private, shared, and smart pools. It also has a governance token dubbed BAL, which serves as a means of settlement. IL and NET APYs vary for every pool, but most of them are currently operating with loss.
3. Kyber Network
Similar to previous protocols, Kyber is also Ethereum-based and it permits dApps to provide liquidity and thus enhance their user experience. In this manner, Kyber serves as a one-stop platform for paying, swapping, and receiving tokens in a single transaction. It has its native token, KNC, and KNC+ETH is actually the most favorable pool, with an APY of 11,70%.
Dexvers is a new-generation decentralized exchange platform that has recently launched its 4-phased bootstrap liquidity program. Dexvers offers an impressive 200% APY for its USDC – DXVS pool and additional rewards for Phase 1 liquidity providers. Its proprietary token is called DXVS. Dexvers also offers additional features such as superior analytics, staking, elite customer service, the StarBurst crowdfunding program, and many more.
5. Keeper DAO
Another DeFi protocol built on Ethereum, Keeper DAO. Its DAI pool offers 20.03% APY. Keeper has recently launched the Rook protocol that ‘’lets you reach all liquidity from a single app and trade with fast on-chain limit orders that fill without gas, fees, slippage, and are protected from MEV’’.
Uniswap offers many ERC-20 token liquidity pools, supporting contracts in a 1:1 ratio. It’s an open-source decentralized exchange where anyone can launch a new pool for any token with zero fees. Uniswap offers APY up to 7% and has a native UNI token. Note that, when you decide to add liquidity, you have to deposit it in exchange for UNI tokens.
DeversiFi is another non-custodial protocol best known for its high transaction/second rate. It’s powered by STARKEX smart contracts and gives APY up to 19%. DeversiFi also offers portfolio management tools, along with simple swaps and complex API trades.
Bancor uses algorithmic market-making methods for leveraging pooled liquidity. This protocol offers 6% APR + compounding interest (highest around 32%). Apart from the usual liquidity features, Bancor Relay resolves the volatility issues regarding liquidity. Bancor also offers 100% impermanent loss protection.
9. OIN Finance
OIN is the first DeFi project that runs on the Ontology blockchain. Apart from swapping, OIN Finance offers services such as multicoin farming. APYs this protocol offers aren’t usually high, with an exception of the stNEAR pool (around 44%).
10. Convexity Protocol
Convexity Protocol has an interesting feature – creating collateralized option contracts and selling them as tokens. Convexity also operates with ERC-20 tokens and offers various APRs and APYs, the highest for CRV with 35%.
There are many liquidity pools out there, and a lot of them are very similar. Before investing, DYOR is mandatory (do your own research). Just because a protocol has a good reputation, doesn’t mean that investing in a specific pool will pay off.
You should also consider the difference between APR (Annual Percentage Rate) and APY (Annual Percentage Yield). The first refers to the interest rate on an account plus fees, and the latter on what you can earn on an account over a year + compound interest.
It’s always useful to use multiple sources of information and to ask experienced traders and crypto enthusiasts about their experiences and potential tips.
Since the crypto market is extremely volatile, you should avoid putting all your eggs in one basket and thus protect your assets.