July 20, 2021

How to Provide Liquidity (LP) on THORChain

This guide provides a brief introduction to earning yield as a liquidty provider on THORChain. To learn more about LPing, check out our friends over at LP University.

What is Liquidity Pooling?

To describe it in simplistic terms, let's draw some similarities between THORChain and that of a typical bank.

When you deposit $USD into your bank account, the bank gives you a promise that you can withdraw it anytime you want, plus an additional interest fee.

As of 2021, the best interest rates offered by banks are a laughable 0.5% per year. Some banks even charge negative rates, actually costing you money. Meanwhile the banks are using your money for currency exchanges, loans and Forex trading, making them Billions of dollars of profit every year.

Thankfully, this is not the case on decentralized cryptocurrency exchanges like THORChain.

THORChain puts the power and profits back into the hands of those who provide liquidity and support the THORChain Network.

By depositing your cryptocurrency holdings into THORChain's Liquidity Pools you will begin to earn passive income generated in the form of fees accrued from Swaps, and from block rewards from the protocol.

The fee rates vary based on Pool Depth and Swap Volume, but can be anywhere from around 10% APY to over 100% APY.

How to enter the liquidity pools and earn passive income

Preparation For Entry:

⚡ Check the current funds cap level on the ThorSwap Dashboard.

It is NOT possible to provide liquidity if the funds cap is above 90%.

⚡ Connect your wallet to ThorSwap. If you don't know how, there's a guide for that.

⚡ Decide which pools you want to enter

⚡ If you want to enter Symmetrically, you must first Swap 50% of your assets into native THOR.RUNE.

  • If you don't know how to make a Swap into THOR.RUNE, there's a guide for that.
  • If you want to enter A-Symmetrically, skip this step.

⚡ Make sure you have enough gas fees in your wallet.

  • All ERC20 Tokens require Ethereum for gas fees.
  • All BEP2 Tokens require BNB for gas fees.
  • Bitcoin and other tokens deduct gas fees from their own token.

Depositing Into The Liquidity Pools:

1️. Click the Deposit button on the https://app.thorswap.finance/ page.

2️. Choose which asset to Pool.

In the example below, we are going to A-Symmetrically Pool Native Bitcoin.

To do this, first select BTC Native as the Token and then select the option for "BTC" to enter A-Symmetrically.

3️. Choose the amount to Pool by moving the slider between 0%-100%

4️. Click ADD to complete.

Which Liquidity Pools Should You Enter?

There are many ways to take advantage of THORChain's liquidity pools, depending on your individual goals.

Most people choose to pool assets they believe will increase in value long term.

Additional considerations for which pool to Provide Liquidity are:

  1. APY - The amount of interest earned in fee rewards (This value fluctuates based on the Swap Volume)
  2. 24 Volume - The total Swap volume for the last 24 hours.
  3. Liquidity - This is the Depth of the Pool. Deeper pools attract higher swap volume, but reduce your fee % entitlement in the Pool as a Liquidity Provider.

To learn more about liquidity pooling on THORChain, check out our friends over at LP University.

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