If you haven't started playing in the liquidity pools, perhaps it's time you started. They can be a great way to passively earn tokens without having to always delegate your HP for them. That frees up your HP to curate others and build up your own HP faster.
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What Are They?
Liquidity pools are designed to make it easier for people buy and sell tokens, and also add stability to the price. If you go on Hive-Engine or Tribaldex and the only people willing to sell the token you want are charging double what it's sold for in the past, then you either pay the price they want or wait to see if anyone else will place a sell order for lower.
They also help when you want to swap tokens. Some pools are paired with Swap.Hive and another token, for when people want to get into and out of one specific token. Other liquidity pools are paired with other tokens. This makes swapping out your tokens much easier, whether you're wanting to convert to Swap.Hive or another token, and the price is usually a little cheaper than buying or selling on Hive-Engine or Tribaldex.
Research
The rewards for these pools can vary. I like to use BeeSwap to look at a pool's APR, rewards and liquidity before jumping into one.
The APR of pools can fluctuate, so keep that in mind and don't get your mind set on a single number, but rather a range of return you're willing to accept.
The rewards can be paid out in Swap.Hive, actual tokens or both. For example, when I was in the Swap.Hive:PIMP pool, I was contributing enough liquidity to get PIMP, a small amount of Swap.Hive and a bonus small drip of other gaming-related tokens.
I always like to look at total liquidity before committing, because it will dictate how easily I can move tokens in and out. If liquidity is low, then I may want to commit a smaller amount or avoid it all together, since I may not be able to get funds back out when needed. If liquidity is "deep" then I'll have less hesitation about committing larger numbers of tokens to the pool.
Temporary Loss
One thing to keep in mind is that when you are providing liquidity, someone else could be exiting the pool. When that happens, your tokens may be used to do that. You may occasionally look and see that the number of tokens you have in the pool is less than what you originally put into it. That's normal.
If you're committing to a liquidity pool for the long-term and doing your research, then this won't be an issue. You'll get those back over time as more people add liquidity to the pool, and you'll also be receiving rewards the whole time.
Ready to Jump In?
If you're ready to jump in, then good luck! Do it slowly and get a feel for how things work. It's easier to start small and work your way up to a larger position as you become more comfortable. Don't be afraid to take profits or even liquidate if another pool seems to be more profitable longer term. Have fun and enjoy those earnings!
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