Tether USDt

Ethereum

Uniswap

Pendle

Aerodrome Finance

Global Dollar

Hims & Hers Health Tokenized Stock (Robinhood)

<h2 id="header-0">Key Facts</h2>
<ul>
 <li>Providing liquidity means depositing tokens into a decentralized exchange pool for traders to swap against, and liquidity providers earn a share of each swap’s fee, typically 0.01% to 1%.</li>
 <li>Impermanent loss can outweigh those fees: if one token in a 50/50 pool doubles against the other, the provider ends up 5.7% behind simply holding, and the gap reaches 25.5% at 5x.</li>
 <li>Single-sided deposits, zaps and auto-rebalancing vaults now automate much of the range management that concentrated liquidity requires, though vaults take a cut of earnings and add another layer of smart contract risk.</li>
</ul>
 Every swap on a decentralized exchange draws on a pool of money that other people have deposited. Supplying that money is called providing liquidity, and it earns a cut of every trade. In 2026, it can also earn token rewards and, on newer chains, possibly airdrops.
The modern liquidity toolkit has changed: you can now deposit a single token, let software manage your position, or pool tokenized stocks on Robinhood Chain.
<h2 id="header-1">What Is Providing Liquidity?</h2>
A<a target="_blank" rel="noopener noreferrer nofollow" href="https://coinmarketcap.com/academy/glossary/decentralized-exchange-dex"> decentralized exchange</a> does not have an order book.&nbsp;
Instead, traders swap against a<a target="_blank" rel="noopener noreferrer nofollow" href="https://coinmarketcap.com/academy/glossary/liquidity-pool"> liquidity pool</a>, which is essentially a<a target="_blank" rel="noopener noreferrer nofollow" href="https://coinmarketcap.com/academy/glossary/smart-contract"> smart contract</a> holding two tokens, called a trading pair. A formula called an<a target="_blank" rel="noopener noreferrer nofollow" href="https://coinmarketcap.com/academy/glossary/automated-market-maker-amm"> automated market maker</a> sets the price, usually using something known as the constant product formula.
Anyone can add tokens to a pool and get a receipt for their share:<a target="_blank" rel="noopener noreferrer nofollow" href="https://coinmarketcap.com/academy/glossary/liquidity-provider-tokens-lp-tokens"> liquidity provider (LP) tokens</a> or, on Uniswap v3 and v4, an NFT. Every swap pays a fee (usually 0.01% to 1%) which gets split among LPs.
A pool with a 0.3% fee that trades $1 million a day pays its providers $3,000 a day.
<h2 id="header-2">How Liquidity Providing Has Changed</h2>
Uniswap's original 2018 model spread your two tokens across every possible price, ensuring that trades could occur at any price point within the range of the tokens. In 2020's "DeFi summer," protocols paid depositors extra tokens, known as<a target="_blank" rel="noopener noreferrer nofollow" href="https://coinmarketcap.com/academy/glossary/liquidity-mining"> liquidity mining</a>. APRs hit the thousands, then collapsed as farmers dumped the rewards.
Uniswap v3 added<a target="_blank" rel="noopener noreferrer nofollow" href="https://coinmarketcap.com/academy/glossary/concentrated-liquidity"> concentrated liquidity</a> in 2021, allowing you to pick a price range that suits your risk tolerance. Your money could earn a lot more while the price stays inside your range, but nothing once it leaves. That meant more profit and, at the time, more work, since rebalancing is often necessary.&nbsp;
But in 2026, tools now eliminate the bulk of the hassle.
<h2 id="header-3">What Is Providing Liquidity?</h2>
<a target="_blank" rel="noopener noreferrer nofollow" href="https://coinmarketcap.com/academy/glossary/impermanent-loss">Impermanent loss (IL)</a> is the cost of letting the pool rebalance you. When one token rises, traders buy it from the pool. You end up with less of the winner and more of the loser.
If one token in a 50/50 pool doubles against the other, you finish 5.7% behind holding. At 3x, the gap is 13.4%, and at 5x it's 25.5%. It reverses if prices return, but locks in when you withdraw; that’s why it’s called “impermanent” loss.
Narrow ranges magnify this effect.
<img src="https://academy-public.coinmarketcap.com/optimized-uploads/fdeb079239fc4c148fc3835c4bfb3a7e.png" alt="Impermanent loss curve for a 50/50 pool">
Source: CoinMarketCap Academy&nbsp;
That's why many providers lose money. Bitquery tracked Ethereum's eight busiest Uniswap v3 pools for the year through mid-October 2026. Providers collected $41.6 million in fees but finished $20.4 million behind holding, after gas.
Only 34% of positions beat holding.
So judge a pool by your real return: fees plus rewards, minus impermanent loss and gas. To limit the loss, pick pairs that move together, such as two stablecoins, and use wider ranges.
Incentivized pools add another layer to the equation but can make it easier to stay ahead of IL.
<h2 id="header-4">The 2026 Liquidity Toolkit: Single-Sided Deposits and Vaults</h2>
Single-sided liquidity lets you deposit only one of the two tokens in a pool on Uniswap or Solana's Meteora.
Say Ethereum (<a target="_blank" rel="noopener noreferrer nofollow" href="https://coinmarketcap.com/currencies/ethereum/">ETH</a>) trades at $2,400. You deposit only ETH into an ETH/USDC pool, in a range from $2,600 to $3,000. If ETH climbs into that range, the pool sells your ETH for USDC. It works like a limit order that pays you to wait. Impermanent loss only applies inside your range.
Zaps go one step further and let you enter an LP position with a token that isn’t part of the pool. For example, you can send in<a target="_blank" rel="noopener noreferrer nofollow" href="https://coinmarketcap.com/currencies/tether/"> USDT</a>, swap it into ETH and<a target="_blank" rel="noopener noreferrer nofollow" href="https://coinmarketcap.com/currencies/global-dollar-usdg/"> USDG</a>, and deposit both, all in a single transaction. Pendle, Beefy, and KyberSwap offer zaps.
Make sure to check the<a target="_blank" rel="noopener noreferrer nofollow" href="https://coinmarketcap.com/academy/glossary/slippage"> slippage</a> on the hidden swap, as it can be significant.
Auto-rebalancing vaults manage a concentrated position for you. Arrakis, Beefy, and Kamino move your range with the price and reinvest your fees automatically, but they charge a cut of earnings. Each rebalance can lock in losses, and the vault itself adds an additional layer of risk over DIY approaches.&nbsp;
There are also ways to earn on top of your LP position. On Aerodrome, a DEX on Base, you can stake your position to earn its<a target="_blank" rel="noopener noreferrer nofollow" href="https://coinmarketcap.com/currencies/aerodrome-finance/"> AERO</a> token. Merkl, a rewards platform, pays LPs on many DEXs without staking. Pendle, a market for trading future yield, pays LPs swap fees,<a target="_blank" rel="noopener noreferrer nofollow" href="https://coinmarketcap.com/currencies/pendle/"> PENDLE</a> tokens, and part of the pooled asset's yield.
Merkl now also funds campaigns on tokenized stock pools.<tweet-embed url="https://x.com/merkl_xyz/status/2111072027670880320"></tweet-embed>
<h2 id="header-5">New Chains and Tokenized Stocks</h2>
Robinhood Chain, an Ethereum<a target="_blank" rel="noopener noreferrer nofollow" href="https://coinmarketcap.com/academy/glossary/layer-2"> layer-2</a> built on Arbitrum, opened in July. Its<a target="_blank" rel="noopener noreferrer nofollow" href="https://coinmarketcap.com/academy/glossary/total-value-locked-tvl"> </a>current TVL sits near $1.14 billion. Its DEXs traded $6.8 billion in the week to Oct. 20. At 0.1% fees, that’s $6.8 million shared between LPs that week.
Further reading: <a target="_blank" rel="noopener noreferrer nofollow" href="https://coinmarketcap.com/academy/article/whats-the-big-deal-about-robinhood-chain">What's the Big Deal About Robinhood Chain? Why the L2 Is Thriving</a>
Around 190<a target="_blank" rel="noopener noreferrer nofollow" href="https://coinmarketcap.com/view/tokenized-stock/"> tokenized stocks</a> trade on Robinhood Chain, and eligible users can pool them. They aren't available in the US, Canada, the UK, and a few other countries.
<img src="https://academy-public.coinmarketcap.com/optimized-uploads/cc0dfd2b8f144eb0a9d202212c02147f.png" alt="Robinhood Chain TVL since its July launch">
Source: DefiLlama, Oct. 20, 2026
On Oct. 20, the largest NVDA/USDG pool held about $3.1 million and traded $4.9 million in a day. Uniswap put its APR at about 21%.
<img src="https://academy-public.coinmarketcap.com/optimized-uploads/151c99e36969490d89b631a244085f87.png" alt="Uniswap's NVDA/USDG pool page on Robinhood Chain">
Source: Uniswap, Oct. 20, 2026
Stock pools have extra risks that you need to be aware of: prices can jump when Wall Street reopens, and thin pools can be cornered. On Aug. 30, a meme coin's pool soaked up most of the on-chain supply of the Hims &amp; Hers Health tokenized stock (<a target="_blank" rel="noopener noreferrer nofollow" href="https://coinmarketcap.com/currencies/hims-hers-health-tokenized-stock-robinhood/">HIMS</a>). It briefly traded at four times the real share price.
Robinhood CEO Vlad Tenev <a target="_blank" rel="noopener noreferrer nofollow" href="https://x.com/vladtenev/status/2089813816611922368">described</a> the current moment as "the early innings of a global tokenization supercycle." Coinbase CEO Brian Armstrong was blunter:<tweet-embed url="https://x.com/brian_armstrong/status/2010095591620247940"></tweet-embed>
<a target="_blank" rel="noopener noreferrer nofollow" href="https://coinmarketcap.com/academy/article/circle-arc-blockchain-usdc-gas">Circle's blockchain Arc</a> has been live since Sept. 16. Most of its $525 million TVL sits in lending, not DEX pools. Some users pool there hoping for an ARC<a target="_blank" rel="noopener noreferrer nofollow" href="https://coinmarketcap.com/academy/glossary/airdrop"> airdrop</a>, but Circle hasn’t published any criteria, so treat any reward as a bonus.
<h2 id="header-6">Risks and Rewards</h2>
Every pool carries smart contract risk. Hackers snagged $223 million from Cetus on Sui in May 2025. Balancer lost about $128 million to a rounding bug that November. Reward tokens can (and typically do) fall faster than they're paid out.
New chains add bridge risk, and their thin pools attract<a target="_blank" rel="noopener noreferrer nofollow" href="https://coinmarketcap.com/academy/glossary/rug-pull"> rug pulls</a>, so be doubly cautious until they have been battle-tested.
Here are some rough APRs on Oct. 20, 2026, from DefiLlama and Uniswap:
<table class="cms-table" style="min-width: 75px;">
 <colgroup>
 <col style="min-width: 25px;">
 <col style="min-width: 25px;">
 <col style="min-width: 25px;">
 </colgroup>
 <tbody>
 <tr>
 <td colspan="1" rowspan="1">Pool type</td>
 <td colspan="1" rowspan="1">Typical APR</td>
 <td colspan="1" rowspan="1">Source of yield</td>
 </tr>
 <tr>
 <td colspan="1" rowspan="1">Stablecoin pairs (<a target="_blank" rel="noopener noreferrer nofollow" href="https://coinmarketcap.com/currencies/usd-coin/">USDC</a>/USDT)</td>
 <td colspan="1" rowspan="1">0.5–4%</td>
 <td colspan="1" rowspan="1">Fees</td>
 </tr>
 <tr>
 <td colspan="1" rowspan="1">ETH/USDC,<a target="_blank" rel="noopener noreferrer nofollow" href="https://coinmarketcap.com/currencies/wrapped-bitcoin/"> WBTC</a>/ETH on Ethereum</td>
 <td colspan="1" rowspan="1">5–15%</td>
 <td colspan="1" rowspan="1">Fees</td>
 </tr>
 <tr>
 <td colspan="1" rowspan="1">Same pairs on Base and Arbitrum</td>
 <td colspan="1" rowspan="1">20–60%</td>
 <td colspan="1" rowspan="1">Fees, some rewards</td>
 </tr>
 <tr>
 <td colspan="1" rowspan="1">Pendle stablecoin pools</td>
 <td colspan="1" rowspan="1">8–15%</td>
 <td colspan="1" rowspan="1">Fees, yield, PENDLE</td>
 </tr>
 <tr>
 <td colspan="1" rowspan="1">Robinhood Chain NVDA and ETH pools</td>
 <td colspan="1" rowspan="1">20–35%</td>
 <td colspan="1" rowspan="1">Fees, full range</td>
 </tr>
 </tbody>
</table>
Base and Arbitrum pay more because their pools are small relative to their trading volume. Fees follow volume, so these numbers can halve in a quiet week. A very high APR usually means thin liquidity, heavy rewards, or both.
<h2 id="header-7">How To Start Safely</h2>
<ol>
 <li>Begin with a stablecoin pair or a wide-range ETH/USDC pool.</li>
 <li>Favor pools with high daily volume for their size.</li>
 <li>Deposit only what you can afford to lose.</li>
 <li>Every week or two, compare your position with simply holding (keep a spreadsheet).</li>
 <li>Withdraw if rewards end or one token runs away.</li>
</ol>
Further reading:<a target="_blank" rel="noopener noreferrer nofollow" href="https://coinmarketcap.com/academy/article/how-to-buy-tokenized-stocks"> How To Buy Tokenized Stocks, Self-Custody Them, and Earn Yield</a>

Providing Liquidity in DeFi: How Liquidity Pools Work in 2026

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