The main risk associated with providing liquidity is the impermanent loss. You can read more about it here. Another risk is rug pulls, though these are most often related to illegitimate projects.

The main risk associated with providing liquidity is the impermanent loss. THORChain covers you with ILP (Impermanent Loss Protection). You can learn more about it here:

https://docs.thorchain.org/learn/understanding-thorchain#ilp-how-thorchain-protects-its-liquidity-providers

https://docs.thorchain.org/frequently-asked-questions#will-i-have-impermanent-loss-protection-if-i-provide-liquidity-in-thorchain

To learn more about pooling (strategies, understanding) on THORChain, we recommend you to join the LPU (Liquidity Provider University) discord.

To provide liquidity, start by going to the "Pooling" tab of the app. You will automatically start at the overview, and from there, you want to move to "Available Pools".

Here you can see all the available pools together with their current APY (you can also sort the pools based on different criteria). Next, click on the pool you want to add liquidity to (in this example, we will use BUSD) and choose whether you wish to deposit Symmetrically or Asymmetrically. In this example, we will use Asymmetrical Deposit.

After choosing the deposit method, the following screen appears where you set how much you want to deposit into the pool:

Next, you have to acknowledge that the liquidity pooling is provided by THORChain and click on "Add Liquidity now". 

After the transaction goes through the network, the following screen appears, and you have successfully provided liquidity.

You can check all the pools into which you have deposited assets via the "Pooling" tab and its subpage "Your Pools".

P.S. You can also get to the pooling menu through the individual asset page (see screenshot below)

THORChain offers impermanent loss protection of 1% a day, which means after 100 days you are entitled to 100% reimbursement of your impermanent loss. 
This means after 100d you will minimum get out what you put in (not in dollar terms but crypto asset you provided).  

Example with stablecoin:  
1) You provide 1000 BUSD asymmetrical to the BUSD pool.  
2) At time of writing this converts automatically to 500 BUSD ($500), and 125 Rune ($500), totalling $1000. 
3) Rune is fluctuating and redeemable amount is let's say 300 BUSD ($300) and 200 Rune ($450).
4) you have an impermanent loss. 
5) this loss gets covered 1% per day i.e. after 100% you get reimbursed minimum 500 BUSD and 125 Rune.

Please note that the IL is not calculated based on dollar terms but digital asset terms. 

Second example:   
1) You provide 1 BTC asymmetrical to the BTC pool.  
2) At time of writing this converts automatically to 0.5 BTC ($20k), and 5000 Rune ($20k), totalling $40000. 
3) Rune and BTC price are fluctuating and redeemable amount is 0.4 BTC and 6200 Rune totalling $29000. 
4) you have an impermanent loss.  5) this loss gets covered 1% per day i.e. after 100% you get reimbursed minimum 0.5 BTC and 5000 Rune. 

Please note that the IL is not calculated based on dollar terms but digital asset terms. 

How does the impermanent loss protection work?

How to decide between Symmetric and Asymmetric entry when providing liquidity? The following graphic will help you make that decision.

You can stake our multi-utility token, $TGT, to earn 13% APR either through our website or directly in the app. Besides the APR, when staking enough $TGT, you can unlock our community tiers and enjoy benefits such as reduced swapping and liquidity providing fees. Read on to find detailed guide on "How to Stake $TGT".

After arriving on the home page of THORWallet DEX, scroll down until you see the following screen:

Here, click on "Stake now" after which you will arrive on the following screen:

From here, click on "Connect to Web3" and connect your Web3 wallet such us MetaMask. After this step, you arrive on the following screen:

Here, enter the amount of $TGT you wish to stake, after which the "Enter an amount" button changes to "Stake". Finally, click on"Stake" and approve the network fee/s to stake your tokens. Note: When staking for the first time, you will  have to approve two transactions: the staking contract and the transfer of funds to the staking vault.

Now, you have successfully staked your $TGT!

First, navigate to the $TGT asset page as shown on the following screen shot.

After clicking on "Stake TGT", you will be at the following screen. Here, you can input the amount of $TGT you wish to stake and click on "Continue". After this, you will end up on the following screen, where you can see the overview of the fees.

Finally, click on"Stake" and approve the network fee/s to stake your tokens. Note: When staking for the first time, you will  have to approve two transactions: the staking contract and the transfer of funds to the staking vault.

A liquidity provider is a stakeholder that provides liquidity (a liquidity pair) into a pool that is needed to run a decentralised exchange. He/She gets rewarded with a share of the trading fees generated with that pool and also THORChain's token emmision which is reflected in the APY.

Please note that a liquidity provider is exposed to impermanent loss. 

How does the APY for liquidity pools get generated?

Yes, the assets are transferred to THORChain’s address/vaults on-chain but only your address (private key) can redeem the asset back. All code is open-sourced, and is audited multiple times. You can either audit the code yourself, or trust the community who have pored over the code; to make sure the above points are correct.

Do my coins leave my wallet when providing liquidity?

The following graphic shows what happens when you open multiple pools with the same asset.

Impermanent loss (IL) happens when you provide liquidity to a liquidity pool, and the price of your deposited assets changes compared to when you deposited them. The bigger this change is, the more you are exposed to impermanent loss. In this case, the loss means less dollar value at the time of withdrawal than at the time of deposit. THORChain offers impermanent loss protection of 1% a day. 

A liquidity provider is a stakeholder that provides liquidity (a liquidity pair) into a pool that is needed to run a decentralised exchange. He gets rewarded with a share of the trading fees generated with that pool which is reflected in the APY.   

At THORChain a liquidity provider has two options how to provide liquidity: symmetrical or asymmetrical.   

Symmetrical means 50% Rune and 50% the asset you've chosen. Asymmetrical means 100% in your chosen asset. It is important to note that if you provide liquidity asymmetrical, a swap is pursued in the back, that leads to a symmetrical allocation anyway.  

This means a liquidity provider is always exposed to two assets: Rune and your chosen asset.   

The APY is earned on both of those asset and auto-compounded in the pool. 



When you provide liquidity you are exposed 50% to Rune and 50% to the assets you have chosen. This is independent if you have provided liquidity symmetrical or asymmetrical. 



What tokens am I exposed to when liquidity pooling?

Liquidity Pooling Strategy