In addition to Savers, THORChain also offers Liquidity Pools (LP) as a means of earning rewards. This method of earning yield/rewards takes on more risk because your position is tied to the performance of RUNE, and you may not be able to take out as much as you put in.
Liquidity Providers should be considered a bet that RUNE will increase faster, or at least in line with the crypto you are depositing. If you believe RUNE won’t go up in value along with your crypto, this isn’t for you.
What is it?
Liquidity providers in THORChain enter a “pool” of assets which provide liquidity for THORChain. In exchange for providing this liquidity, THORChain will give you a percentage of the transaction fees that are generated when people use it for swaps. The percentage of fees attributed to LP’ers is higher than that of Savers because they are taking on more risk.
You can access the liquidity pool in two ways:
- Single-sided (asymmetric) deposit.
- This means you are depositing a single asset, such as Bitcoin, to the pool. When you deposit your Bitcoin, 50% of it is immediately sold for RUNE as your position must be a 50/50 ratio with RUNE.
- If Bitcoin increases in value against RUNE, you are not entitled to that whole profit as you are now 50% exposed to Bitcoin, and 50% in RUNE.
- Dual-sided (symmetric) deposit.
- This means you are depositing an equal amount of both your crypto of choice, and RUNE in US Dollar terms.
It is possible to only deposit RUNE, but when you do so, you have to pick which crypto you want to pair it with, such as BTC or ETH. Regardless of whether you enter asymmetrical or symmetrical, you always enter the pool with a 50/50 ratio.
Here’s a simple example of how it works:
We will assume ETH = $1k, and RUNE = $5
Let’s say you deposit 1 ETH that was worth $1k USD. Half of your ETH is sold for RUNE, so your new position then becomes $500 worth of ETH and $500 worth of RUNE. If ETH doubles and goes to $2k while the RUNE price stays the same, the amount of ETH you can withdraw from the pool decreases. Your ETH portion is now worth $1k (the original $500 which has now doubled), and your RUNE position is still the same, worth $500, for a combined total of $1,500. Since 1 ETH is now worth $2k, your $1,500 pool position is now worth .75 ETH so in essence, you lost .25 ETH.
On the other hand, if RUNE was the one that doubled and ETH stayed the same, the opposite can occur. If RUNE went to $10, your $500 RUNE position is now worth $1k, while your ETH position is still worth $500, for a total value of $1,500. But since 1 ETH price is still $1k and your positions are now worth $1,500, you could pull out 1.5 ETH from the pool, resulting in .5 more ETH for you.
What crypto can I deposit into the Liquidity Pool?
A quick and easy way to access the list is through THORSwap’s interface, but an unofficial list is below:
- USDC (on Ethereum, Binance Smart Chain, & Avalanche)
- AVAX
- BNB
- ETH
- BTC
- USDT (on Ethereum & Avalanche)
- BUSD
- LTC
- DOGE
- ATOM
- BCH
- DAI
- TGT
- THOR
- WBTC
- XRUNE
- FOX
- LUSD
- XDEFI
- USDP
- GUSD
- LINK
- AAVE
- SNX
- DPI
What are the risks?
The risk for Liquidity Providers is the performance of RUNE versus the asset you deposit. If RUNE goes down in value while your deposited asset goes up in value, the amount of your deposited crypto that you can withdraw from the pool will be less than what you put in. On the flip side, if the price of RUNE goes up in value versus your deposited crypto, you could remove more than you put into it.
What are the rewards?
Every time a trade occurs on THORChain, a percentage of the fees are paid out in three ways: to the Nodes who secure the network, Savers depositors, and Liquidity Providers. LP’s earn less than Nodes, but more than Savers. When the rewards are attributed to you, they are balanced to retain the 50/50 split between your deposited crypto and RUNE.
Current yields can be found on THORYield, but this is very dependent on the performance of RUNE.
Where can I access THORChain Liquidity Pools?
- THORSwap– users will not incur fees to go into and out of LP outside of the blockchain transaction fees.
- THORWallet
- ASGARDEX
- DecentralFi
Let us know if we missed any!
Step-by-step guide
Here is an example of adding USDC by itself to the Liquidity Pool:
- Head over to THORSwap’s website, and click Enter App at the top right.
- In the menu on the left, click on Liquidity.
- Select the crypto you are depositing to earn rewards on, and in our video example will show us using ETH.
- It is time to connect your wallet.
- If you are using your hardware wallet, you’ll need to connect your Ledger via USB to your computer, or if you have the Nano X, you can connect to your phone through Ledger Live via Bluetooth. For this step, you will need to have the Ledger unlocked and the Ethereum application opened before proceeding to the next step.
- Back to THORSwap, select the Ledger option underneath Hardware Wallets, then select the Ethereum chain icon if it isn’t already checked. Click on I agree to the Terms of Service, and Connect Wallet.
- If you are using a Software Wallet, choose your wallet from the list or select WalletConnect and scan the QR code from your personal Software Wallet’s QR code scanning feature.
- If you are using your hardware wallet, you’ll need to connect your Ledger via USB to your computer, or if you have the Nano X, you can connect to your phone through Ledger Live via Bluetooth. For this step, you will need to have the Ledger unlocked and the Ethereum application opened before proceeding to the next step.
- Once your wallet is connected, select Deposit.
- Change the top crypto from the default BTC to whatever you are depositing. In our video guide below, we are only depositing USDC, and then select USDC only option just above it.
- Enter the amount of crypto you want to deposit.
- Click Approve, then review the popup screen and review the details, then click Confirm.
- If you are using Ledger, this sends a notification to your Ledger device to review the transaction. Scroll by pressing the right button until you see Approve, then click both Ledger buttons at the same time to approve.
- You are done! Wait for your deposit to complete.
- To track how your LP position is doing, download the THORYield mobile app and enter your wallet address for details on how much you are up or down on your position, and how much you could pull out of the LP.
Video demo of how to supply USDC into the USDC LP, using THORSwap: