🛠️Understanding Torah Pools
As you should know, providing liquidity has its fair share of risks so in this article, we review the different Torah pools to help you find one that matches your risk tolerance while explaining the risks involved with being a liquidity provider on Torah.
There are currently several Torah pools with new pools added all the time.
It’s important to understand that when you provide liquidity to a pool, no matter what coin you deposit, you essentially gain exposure to all the coins in the pool which means you want to find a pool with coins you are comfortable holding.Before we continue, we assume you have familiarized yourself with the basics of Torah:
All Torah liquidity gauges receive TRH based on how much the DAO allocates to it.
What are liquidity pools?
"If you are new to DeFi, liquidity pools are a seemingly complicated concept to understand.
Liquidity pools are pools of tokens that sit in smart contracts. If you were to create a pool of DAI and USDC where 1 DAI = 1 USDC. You would have the same amount of tokens, let’s say 2,000 tokens (1,000 DAI and 1,000 USDC) in the pool.
If trader 1 comes and exchange 100 DAI for 100 USDC, you would then have 1,100 DAI and 900 USDC in the pool so the price would tilt slightly lower for USDC to encourage another trader to exchange USDC for DAI and average the pool back.
You can see those details for each pool and it is something you can take advantage of when depositing."
On the screenshot above for the ,DAI is low which means you could add it for a bit more bonus . The basic idea is that you incentivise traders to push the price back to what it should be (in this case, 1).
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