if the tvl of an liquidity is very low will i get any earnings at all

i found an lp pool which has a tvl of a 100 usd but a daily apr of 5%. if i deposit into this pool will my investment value increase. or once it hits the tvl value will it stop. how is a lp actully paid out? from the pool it self or the exchange’s treasury.

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7 thoughts on “if the tvl of an liquidity is very low will i get any earnings at all”

  1. If it’s paying 5% on 100 USD TVL then it’s paying out $5 of its exchange fees per day to stakers. If you add 1 million dollars to it it’ll still only pay out $5 in fees, but you’ll get 99.9995% of it (i.e. $4.999975) making the new APR 0.005%. I.e. as the TVL increases the APR will drop proportionally.

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  2. The higher the tvl the lower the apr would go. I suggest you not to put in a 5 percent pool. You can use this simple formula to calculate. 100usd*5apr/100/365(days in a year) and you will see your daily earnings

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  3. This is why I think it’s better to use Spoolfi or any other product that aggregates yield protocols when it comes to yield farming. Since many protocols are combined to make a pool, it makes a lot of sense.

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  4. The more TVL in a yield protocol, the higher the yield. I’m sure many DeFi yield protocols struggle with getting liquidity. Ultimately, it will boil down to middlewares such as Spool to connect users to protocols with substantial liquidity.

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  5. To answer your original question, (how is the LP paying out) it’s neither from the pool or the exchange, each time users use the pool to trade coin A for coin B, that pool takes a cut. It takes part of that cut to pay out the LP providers.

    If the TLV is very low like you said, you will get MORE earning from this pool (assuming you invested a decent amount). You mentioned 50$ out of the 100$ total, meaning you should be getting 50% of all total revenue from this pool.

    This will shrink as others put their money in and your share of the pie shrinks.

    Does that help? Or did I miss your question?

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  6. Starting up with a low liquidity tvl is not a good idea, I saw one recently, but I had to overlook it because I may not get the best out of it, fufu LP with Impossible Finance is actually a good one to start with, since the rewards are cool.

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