Pools Overview
Liquidity pools are fundamental to decentralized finance (DeFi), enabling seamless asset swaps. If you're new to Ethereum or DeFi, here's a simplified breakdown:
- Purpose: Pools hold multiple assets, allowing users to trade between them while liquidity providers (LPs) earn fees.
Curve-Specific Types:
- Stableswap Pools: Designed for assets pegged to each other (e.g., USDC/USDT or stETH/ETH).
- Cryptoswap Pools: Tailored for volatile asset pairs (e.g., ETH/CRV or USDT/ETH).
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Key Insight for LPs
When you deposit into any pool, you gain exposure to all assets within it. Choose pools containing coins you're comfortable holding long-term.
Liquidity Pool Risks
Always review potential risks before participating. Key considerations include:
- Impermanent loss (especially in Cryptoswap pools).
- Smart contract vulnerabilities.
- Market volatility impacting asset pegs.
Stableswap (Curve V1)
How It Works
Stableswap pools stabilize trades between pegged assets (e.g., USDC/USDT) by maintaining a 1:1 value ratio.
Example for LPs:
- Alice deposits $10,000 USDC into a USDC/USDT pool.
- The pool adjusts internally to maintain balance (e.g., converting excess USDC to USDT).
- Unbalanced deposits (e.g., single-asset) incur minor fees.
Cryptoswap (Curve V2)
How It Works
Cryptoswap pools manage volatile pairs (e.g., ETH/USDC) by balancing asset values proportionally.
Example for LPs:
- Bob deposits $5,000 ETH into an ETH/USDC pool.
- The pool ensures ETH and USDC holdings maintain equal dollar values.
- Unbalanced actions trigger small fees to prevent arbitrage exploitation.
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Pool Fees
| Fee Type | Description |
|---|---|
| Standard | 0.01%–0.04% per trade (pool-specific; viewable under pool details). |
| Dynamic | Increases during high volatility to boost LP earnings. |
| Distribution | 50% to LPs (via LP token appreciation), 50% to veCRV holders. |
Balanced actions (equal-value deposits/withdrawals) are fee-free.
Rewards & Yield
Earning Opportunities
Base vAPY:
- Accrues from trading fees, increasing LP token value.
- Includes rebasing yields (e.g., stETH) automatically.
Rewards tAPR:
- CRV tokens, partner incentives, or points programs.
- Requires staking LP tokens (except some points systems).
Yield-Bearing Tokens
Pools with tokens like sUSDe or stETH pass 100% of yield to LPs—no deductions.
FAQ Section
1. What’s the difference between Stableswap and Cryptoswap pools?
Stableswap pools are for pegged assets (e.g., stablecoins), while Cryptoswap pools handle volatile pairs (e.g., ETH/CRV).
2. How do I avoid fees when depositing?
Deposit a balanced mix of assets matching the pool’s current ratios (Stableswap) or equal dollar values (Cryptoswap).
3. Where do pool fees go?
Half benefits LPs (via LP token growth), half goes to veCRV holders governing Curve DAO.
4. Can I earn yield without staking LP tokens?
Yes, for points programs (check project rules), but CRV rewards require staking.
5. Are rebasing tokens like stETH profitable in Curve pools?
Yes—all rebasing yields are retained by LPs with no fees deducted.