Pools Overview

If you are new to Ethereum or DeFi, liquidity pools are a seemingly complicated concept to understand.

Pools hold multiple assets, allowing users to swap between them. Liquidity providers who deposit assets earn fees from these swaps.

In Curve, pools can be 2 different types, these are:

• Stableswap Pools for coins that are pegged to each other, for example USDC and USDT, or stETH and ETH.
• Cryptoswap Pools which are for assets which fluctuate in value against each other, for example USDT and ETH, or CRV and ETH.

It’s important to understand that when you provide liquidity to a pool, no matter what coin you deposit, you essentially gain exposure to all the coins in the pool which means you want to find a pool with coins you are comfortable holding.

Stableswap (Curve V1)¶

Stableswap pools have assets pegged to each other. For example USDC and USDT, as their value should always be close to a 1:1 ratio.

Let's look at an example about how it works for a liquidity provider:

Note: Alice can deposit/withdraw any combination of assets/amounts, but pays a small fee for unbalanced actions (e.g., USDC-only deposit).

Cryptoswap (Curve V2)¶

Cryptoswap pools contain unpaired assets like USDC and ETH, whose relative values fluctuate. This necessitates a different pool design than Stableswap.

Cryptoswap pools maintain an equal value balance between their assets. For example, $1,000,000 in USDC would be matched by $1,000,000 worth of ETH.

Let's look at an example about how it works for a liquidity provider:

Note: Bob can deposit/withdraw any combination of assets/amounts, but pays a small fee for unbalanced actions (e.g., ETH-only deposit).

Pool Fees¶

Pool fees are specific to each pool, they typically range from 0.01%-0.04%. They are shown under the pool details tab on the pool's page. All new pools also have dynamic fees, so in times of high volatility, fees earned by the pools increase.

50% of the pool fees go to the Liquidity Providers increasing the value of LP tokens, and 50% to DAO (veCRV holders).

Balanced deposits and withdrawals are free. Unbalanced actions incur a small fee (max 50% of swap fee). This prevents free swaps via deposit/withdraw cycles. Note: "Balanced" means equal asset values in Cryptoswap pools, but matches current ratios in Stableswap pools.

Rewards & Yield¶

When users deposit to a pool, they receive Liquidity Provider tokens (LP tokens) representing their assets in the pool. With these LP tokens, users can earn two different types of yield:

• Base vAPY: This increases the value of LP token due to accruing pool fees. Note that for rebasing tokens such as stETH, this yield is also included in the Base vAPY.
• Rewards tAPR: These are CRV inflation rewards, other token incentives, and points. To earn asset based rewards, such as CRV or other assets, users must stake their LP tokens. However, many points programs don't require LP token staking. Refer to each project's point program for the most accurate information.

Some pools include yield-bearing tokens like sUSDe and sDAI. All yield from these tokens, goes directly to Liquidity Providers, none is taken away by fees or the pool. This also applies to rebasing tokens, such as stETH, all rebasing yield stays with Liquidity Providers.