Seeing figures like "150% APR" in Bidask pools and wondering, "Where does this generosity come from?" Let’s break down the yield mechanics without complex formulas.
What is APR?
It stands for Annual Percentage Rate. It shows how much you will earn in a year if the pool conditions (trading volume and liquidity amount) remain the same.
Where does the money come from? There are two main sources of yield:
❎ Trading Fees (Swap Fees)
Imagine you’ve opened a small currency exchange office. Every time someone swaps one token for another through your pool, they pay a small fee. This fee is distributed among all liquidity providers proportional to their share. The more people trade in your pool, the higher your income.
❎ Farming Rewards (Incentives)
To attract liquidity to new or vital pairs, protocols often add bonus rewards (e.g., in $HYDRA tokens). It’s like a loyalty program: you get paid extra because your funds help the market operate smoothly.
Why is APR on Bidask sometimes higher than on other platforms?
It's all about concentrated liquidity technology. Your funds don't work "everywhere"; they work within a specific price range where the most active trading occurs. Your capital works more efficiently, leading to more fees.
You act as a high-tech bank, ensuring the market functions, and the protocol fairly shares the profit with you!
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