Bitcoin Forum

What are the risks involved in using your tokens to provide or add liquidity on a pool? Any risk at all apart from the tokens losing value before the APY runs out? I am a long term holder and I don't want to keep holding without earning some tokens more.

The first risk is impermanent loss.

That's because of being locked within a long period of time just to provide liquidity on a pool. And you don't know how much the value will be to your locked tokens.

And the same goes to the pool token that you're helping to provide liquidity. I've learned a big lesson on this one and that's why I'm avoiding it any further because of not so big loss that I've made.

But, you can't just read what the market will look like while your tokens are there locked.

Liquidity pools has a lot risk similar like centralized exchange, it can be hacked, it can be the developer steal everyone coins etc.

How can you think losing of token value is a risk of staking? what's the difference if you hold in your own wallet? it's still have volatility. Actually it's advantage even though your token are losing of it's value, but you're trying to accumulate more coins.

But it's not worth to stake your coins on liquidity pools or exchange, it's better if you work harder and bought more coins.

Its really a high risk high reward for providing liquidity in a pool. Yes you could gain fees and tokens from it but you also have chance to lose tokens and even the value of it depends on the project. Sometime it can be due to recent bad news. Thats why liquidity falls off and it will affect your share in there at a particular pool.