Observing the returns of Splinterlands' "Liquidity Pools" 💸

**Greetings SplinterLovers** 💛 Something I don't usually talk about much is the economy of Splinterlands, and although I've written several posts on this topic, I'm not exactly an expert. However, I do have some knowledge about many things related to the economy of the game ecosystem, and this time I want to talk about something that not many players and/or investors usually discuss, which is the liquidity pools related to the main tokens in the game. I will not open any specific positions, but I will be sharing the main "Liquidity Pools" in the ecosystem and explaining a little about how they work. My goal is for everyone to understand the risk/reward they can bring, since everything has risk, but it is necessary to be aware of all the types of investments that can be made. This is important because if you have, for example, loose DEC and SPS tokens doing nothing and you are a "Holder," this would be a good option to put your tokens from the "Splinterlands" ecosystem to work. **With that clear, I will try to get to the point so that you understand at least the basics of how the famous "Liquidity Pools" work.**  ## How do "Liquidity Pools" work?  **I will explain in very simple terms what a "Liquidity Pool" is and what it is used for, so pay attention:** Basically, "Liquidity Pools" are funds (Tokens) that are locked in a smart contract with the intention of allowing users and/or investors to go to the platform where these tokens are listed and trade and/or exchange them in a decentralized manner, as this also works on well-known exchanges in the ecosystem such as "Binance," but whose liquidity pools are centralized and where transaction fees go directly to the company itself, in this case to the owners of Binance. In our case, as we are dealing with decentralized "Liquidity Pools" on "Tribaldex," we can take our tokens and contribute liquidity to the "Pool" with the intention of earning passive rewards, generally in the two tokens that we have put in 50/50, since we must place half and half for this to work. Furthermore, depending on the amount of money we place, our investment will be represented by a percentage, and depending on that, we will obtain more or less money for contributing liquidity. **I know it can be a little complicated to understand at first, but to summarize it more simply, pay attention to the following:** >* **Liquidity pools are formed with two tokens, for example, DEC/SPS. A certain amount of both tokens is deposited, usually 50/50, which will help other users to exchange them while you, as a liquidity provider, earn commissions on the transactions made by others.** Basically, this is all you need to know about "Liquidity Pools." There is nothing more to it. This is all you need to know about how they work. Of course, there are more details behind them that reduce risk and increase rewards, but I'll leave that for the second section of this post. I won't focus too much on it, but I'll mention it for everyone's information.  ## What are the lowest-risk liquidity pools + recommendations?  **In this section, I will show you which "Liquidity Pools" are the least risky and, in addition, what the intrinsic risks are in this type of investment:** **Which are the lowest-risk pools?** The first thing to know is that, in order to mitigate the risk of losing money and falling into the famous "Impermanent Loss," which is nothing more than the difference between the price at which you entered the tokens into the pool and the current price, which in this case would be lower, this creates what is called "Impermanent Loss," which is what causes you to lose money with this type of investment. Therefore, the idea is to add liquidity to "Pools" with strong tokens. When I talk about strong tokens, I am referring to those with the highest volume in the last 24 hours and those with acceptably high liquidity, to avoid losing if liquidity is very low. To illustrate this clearly, take a look at the following image:  If you look at the image above, you can see the "Liquidity Pools" that I consider to be the safest. This is because I have entered the word "DEC" in the search filter, with the intention of showing me all the pools that have DEC. Now, why do I choose DEC? Very simple: it is the "stable" and transactional token of the Splinterlands ecosystem, so in theory it will always seek to maintain a parity of $1 for every 1000 DEC. Although this is not currently the case, it has much less volatility than SPS and HIVE themselves. This means that if we pair a volatile token such as SPS and HIVE with a stable one such as DEC, the risk will be much lower. That is why the ones shown in the image are literally the safest investments you can make. **Recommendations** * If you want to earn more from your investment, focus your investment on "Liquidity Pools" that have had high volume in the last 30 days and have lower liquidity. This will result in a higher APR, meaning that the percentage of our profit will be more lucrative. In this case, the one that meets this requirement is "Swap.Hive/DEC." * Avoid pairing volatile tokens if you don't know what you're doing, as this will surely cause you losses. In addition, you should monitor your positions at least once a day. * Put in the money you are willing to invest without risking the money you need for recurring expenses. That way, you won't be nervous, because even though we are choosing safer pools, they still carry risks.  ## Conclusion  I hope you enjoyed this post. I've wanted to cover this topic for a long time, and here it is. Of course, I've only talked about the basics of what it is and how it works, but if you want a more practical post, a step-by-step guide on how to add liquidity to Splinterlands tokens through Tribaldex, leave a comment and I'll be happy to prepare this material. If you have any questions about what I have explained in this post about "Liquidity Pools," please comment and I will gladly try to answer them to the best of my ability.