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What Is the Difference Between Pools and Farms

First let’s discuss “pools”:

  • A “pool” is a collection of TWO equal valued amounts of tokens

    • Think of ALGO and  USDC , each with its own balance, but both contained in a single bucket.

    • We will call this the ALGO-USDC pool

  • When you add some of your ALGO and some of your USDC into the ALGO-USDC pool, you get a new token back

    • This is a Liquidity Pool Token (also called LP token or Liquidity token). It represents your share of the ALGO-USDC pool

    • When you return some (let’s say 5) of that  LP token back to the ALGO-USDC pool, you get however much ALGO and however much USDC is represented by 5 LP tokens at the time of the transaction

      • [ side note: ] A person who adds liquidity (tokens) to a pool like this is called a Liquidity Provider

  • The main thing to know about Pools is that they are used for swapping, or getting a cut of HumbleSwap fees (if you add liquidity). But — before farms — you didn’t have anything else to do with your LP tokens, except wait to withdraw from the pool.

 

This is where farms come in:

It takes a single  token from the user (whatever the farm says is being “staked”), and Rewards the user as long as they keep their tokens in the farm. The main thing they do is reward people for locking up their tokens for a set period of time.  This allows Liquidity Providers to earn some extra cash for providing liquidity. But, unlike pools, the funds in a farm stay put until users withdraw