Liquidity pools perform autonomous, peer-to-contract token trades and generate fees from each trade. Users can collect a share of a pool’s trading fees by adding liquidity to a pool and holding its “pool token”.
Pool tokens are ERC20 tokens that represent ownership stakes in liquidity pools. When you add liquidity to a Bancor pool, you receive pool tokens in proportion to the amount of assets you’ve added to the pool.
Bancor pool tokens can accrue value in three ways:
- trading fees generated by the pool
- pool rewards provided by a token project (via “liquidity provider incentive programs”)
- pool rewards provided by the Bancor Protocol (via BNT inflation)
There are now numerous interfaces where you can add and remove liquidity from Bancor pools, track profits and analyze the best-performing pools on the network. Examples include DeFi platforms like Zerion, 1inch, Paraswap, CoTrader and EOS Nation.