Liquidity pools are a critical part of every Automated Market Maker-based exchanges. It makes the exchange process happening not based on matching sellers with buyers, but the exchange rate is algorithmically predefined based on the ratio of tokens in the liquidity pool.
Thus these exchanges are dependent on users providing liquidity. And let’s be honest; no one would lock their tokens away if there weren’t any reward for it.
But there is a reward. And usually quite generous.
In this article, we’ll give you an exact blueprint to start providing liquidity on SundaeSwap for the maximum yield available.
How Yield Farming on SundaeSwap Works
Let’s get a quick look at what yield farming is to fully understand how SundaeSwap might differ from other platforms.
Usually, when looking at any DeFi platform, the platform has listed APRs for different token pairs. Let’s take PancakeSwap as an example.
There are dozens of different active yield-farming pools available. With pretty generous rewards.
That’s because these pairs have active yield farming. This means that the liquidity pool yields an extra reward on top of the trading fees generated by the exchange.
On the other hand, when you look at SandaeSwap, only a handful of pools offer liquidity farming. Let’s check it on this example:
The first NMKR/ADA pool has a farming APR active, and you can yield an extra estimated 33.49% APR. Meanwhile, the second liquidity pool, MELD/ADA, will only yield you a portion of swap fees based on your stake in the pool.
That’s an important thing you should keep in mind when selecting a liquidity pool to provide liquidity to.
While there are certainly some benefits in locking your tokens to a non-farm yielding pool, it’s not that good to outweigh the earning potential.
Especially these market pairs are usually less volatile and offer more certainty. With that out of the way, let’s take a look at how to provide liquidity on SundaeSwap.
How to Provide Liquidity on SundaeSwap
The SundaeSwap protocol allows users to deposit liquidity into existing liquidity pools or create their own. We’ll look at the providing part.
To start, visit SundaeSwap and connect your wallet using the button in the top right corner.
You can see a few different menus on the left side of the page. Although clicking the “liquidity” button might seem right, it’s not. Under the liquidity page, you’ll find information about your currently staked tokens. Instead, click the “Home” button.
You’ll now see a list of liquidity pools and some basic information about them.
As we already discussed in the previous section, although selecting a non-yield farming LP carries some benefits to maximize your earnings, we would rather choose one with a decent farming APR.
Once you choose one, tap on it, and it should open more information, including the option to provide liquidity.
In the “Provide Liquidity” panel that’ll open up, enter the number of tokens you’d like to add to the liquidity pools.
All liquidity pools always carry a 50:50 ratio of assets. So you only need to enter one amount, and it’ll calculate the other.
Finally, review the transaction and confirm it in your wallet. Once done, you can check your position in the “Liquidity” tab back on the homepage.
While following the steps above, you can easily provide liquidity on SundaeSwap.
There are a few things you should keep in mind:
- SundaeSwap doesn’t offer many yield-farming pools. So your yield might be very limited.
- All liquidity pools work in a 50:50 ratio of assets. You would need both assets in the pair in order to provide liquidity. If you have only one of them, you can swap it there.
- There might be some pools that require you to lock your assets in for a set period of time. But you usually won’t find those on SundaeSwap.
However, in our honest opinion, there are other and better-yielding options. SundaeSwap is one of the very few ADA DeXes, so if you are a big fan of Cardano, it still might be the right option for you.