How to pick a pool
Yield comes from fees, and fees come from volume — not from the size of the pool. Five factors that separate a good pool from a trap.
Choosing a pool means balancing fee return against risk and efficiency. Five factors matter.
1. Volume vs. TVL
This is fees generated per dollar deposited. Yield comes from fees, and fees come from volume traded — so a pool with high volume relative to its total value locked (TVL) distributes more fees per unit of capital, while a pool with huge TVL and little volume yields little. Look at the ratio, not the absolute numbers.
2. Fee tier
Stable pairs (stablecoin-to-stablecoin) use low tiers because they have high volume and little price variation; volatile pairs use higher tiers to compensate for the risk. Choose the tier consistent with the pair's volatility.
3. Pair correlation and volatility
This drives impermanent-loss risk. Strongly correlated pairs or stablecoins have low impermanent loss; volatile, uncorrelated pairs have much higher risk. The more volatile the pair, the higher the return you need to compensate.
4. Range choice (for concentrated liquidity)
A narrow range means more fees but leaves the range easily and requires rebalancing. A wide range means fewer fees but is more passive and resilient. Match the width to your volatility expectation and your willingness to manage the position.
5. Security and maturity
Prioritize audited protocols with a track record and good liquidity. Be wary of absurdly high APRs — they often embed the risk of an inflationary reward token, a rug pull, or severe impermanent loss.
Why it matters. The biggest number on the screen — the headline APR, the enormous TVL — is usually the least useful one. Real yield hides in ratios and risk: volume against TVL, fees against impermanent loss, reward against how likely the protocol is to still exist next month. Learning to read those is what separates earning from getting farmed.
Educational information, not investment advice.