There are a great many DEXs that utilise the AMM type protocol to create liquidity pools, which you can become a liquidity provider for. Here is a sample list of some DEXs and a brief explanation of their unique features.
1. Uniswap
Uniswap is one of the oldest DEXs around, and one of the first to distribute its own governance token. It boasts some of the biggest liquidity pools on the Ethereum blockchain. It has become expensive to use in recent years, though that is the fault of Ethereum’s network congestion leading to high gas fees to confirm transactions.
2. Bancor
Bancor was one of the pioneers of AMM type DEXs and liquidity pools and attempts to use complex algorithms to reduce volatility concerns. It has, however, fallen down the pecking order in terms of liquidity depth.
3. Balancer
As its name suggests, Balancer uses a type of protocol that attempts to balance multiple pooling options and ease of adjusting parameters for providing liquidity. It allows the farming option, but calls it liquidity mining.
4. Pancakeswap
Pancakeswap is the biggest DEX on Binance Smart Chain and does benefit from a strong affiliation to Binance – though it is in fact, independent from it. Because of its low fees and fast swapping times, it has rose as a serious challenger to the likes of Uniswap. The only issue is the requirement for blockchain bridges to allow for many popular coins and assets to be traded since the major assets don’t reside natively on Binance Smart Chain.
5. Curve
Curve bills itself as a decentralised liquidity pool for Ethereum-based stablecoin swapping. Because of its focus on stablecoins, it promises highly reduced slippage when compared with other liquidity pools, and an equally low impermanent loss. It might be quite limited for most traders who trade outside of stablecoins, however.
6. 1inch
Technically, 1inch is not a true DEX in itself, but is called a DEX aggregator which allows you to access many popular DEXs, including Uniswap and Pancakeswap mentioned on this list, from a single platform.
It is worth mentioning here, however, since you can still become a liquidity provider on any supported DEX, via the 1inch dashboard. In fact, it might even be easier for you to use 1inch to compare DEXs and liquidity pools since it displays estimated Annual Percentage Yield (APY) from various liquidity pools in real time.
In summary, liquidity pools are central to how DEXs operate but these rely on liquidity providers to be successful. They do provide opportunities for passive income but also come with some risks, which you should always bear in mind when considering whether to become a liquidity provider.
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