Providing Liquidity to CrossCurve Pools

Types of Liquidity Pools

CrossCurve offers two distinct types of pools, each with unique features and earning opportunities.

Stable Pools

Stable pools are designed for assets whose prices are pegged to each other:

• Examples: Stablecoin pairs, such as USDT/USDC

• Derivative Assets: Pairs like wstETH/rETH are also considered stable since their relative prices do not fluctuate significantly

• Goal: Maintain an exchange rate of 1:1 between assets as accurately as possible

• Features: Minimal slippage and stable exchange prices due to a specialized AMM formula

Stable pools are optimized for trading correlated assets with minimal losses and slippage, making them attractive to conservative investors.

Volatility Pools

Volatility pools are intended for pairs of assets with fluctuating prices:

• Examples: USDT/EYWA, ETH/BTC and other uncorrelated assets

• Formation: Created by combining heterogeneous assets

• Protection: Utilize Curve's unique mechanism to mitigate impermanent loss

• Features: Higher risk but potentially higher returns

Volatility pools are suitable for investors willing to accept higher risks in exchange for potentially higher returns.

Liquidity Provision Process

Adding Liquidity

CrossCurve offers two modes for adding/removing liquidity:

1. Easy Mode

• Allows adding or removing funds with a single asset

• Simplifies the process for beginners

• Automatically handles all necessary conversions and transactions

2. via Curve (Balanced)

• Designed for adding large sums

• Requires balanced addition of assets to optimize yield

• Minimizes slippage losses

Importance of Pool Balancing

When working with liquidity pools, it's essential to understand the concept of balance:

• An ideally balanced pool has an equal percentage distribution of all assets

• For instance, in a xCRVUSDC pool with six s-tokens, the optimal share for each asset is 16.6% of the total TVL

• Adding an underrepresented asset (share <16.6%) earns an additional bonus

• Adding an overrepresented asset (share >16.6%) results in losses

Ways to Earn When Providing Liquidity

1. Trading fees

The primary income source for liquidity providers is the trading fees from swaps occurring within the pool:

• Fees are automatically distributed among all liquidity providers

• The amount of fees received is proportional to your pool share

2. Farming and Additional Rewards

In addition to trading fees, liquidity providers may receive extra incentives:

• EYWA inflation allocated by CrossCurve DAO voting as an incentive to attract liquidity

• Other tokens added by external projects to attract liquidity

• Increased rewards for veEYWA holders (vote-escrowed EYWA)

• Points for participating in external project programs

3. Access to StakeDAO and Convex Strategies for Enhanced Yields

• Obtaining higher yields by placing funds into CrossCurve pools through strategies within “Curve Wars” protocols, such as Convex or StakeDAO

4. Cross-chain Capabilities

CrossCurve's unique advantage is its ability to manage liquidity across different blockchains:

• Liquidity providers can add and withdraw liquidity from all available networks

• Liquidity providers can swap LP tokens across networks without impermanent loss

• The ability to quickly and cost-effectively move funds in search of higher yields

Yield Optimization

To maximize yields when providing liquidity, it's recommended to:

• Analyze pool conditions before adding liquidity

• Select the optimal mode:

• • Easy Mode for small amounts and beginners

  • Balanced mode for larger sums and experienced users

• Monitor pool balance when adding or removing liquidity to earn bonuses rather than incur penalties due to pool imbalances

• Combine with EYWA locking to obtain additional rewards through yield boosts

• Participate in voting for liquidity distribution between polls and vote for your pool (if beneficial, considering other opportunities for selling votes)

Conclusion

Providing liquidity on CrossCurve is a powerful earning tool in DeFi. The platform combines Curve Finance's proven reliability with CrossCurve's innovative cross-chain technologies, ensuring user security, convenience, and potentially high returns.

It’s crucial to remember that liquidity provision always entails certain risks; thus, it’s advisable to carefully study pool mechanisms and yield optimization strategies before making significant investments.