77.67% APR on SPS - SWAP.HIVE - My first steps with liquidity pools on Tribaldex (2022.10.03)
Yesterday (on 2022.10.02) I started this with a very little amount of Hive and of SPS, but I am slowly increasing it. I currently have a liquidity position worth of $0.41 USD, and a pending reward of 0.005 SPS. I am just merely testing this.
Currently I really do not understand how this works. I hope that it is not very risky. I do not really want to risk much bigger amount of money.
I know that both of these cryptocurrencies has their own risks, because unlike the Hive Dollar (HBD), none of these (SPS, Hive) are stablecoins. They can quickly move up and down in value.
I currently have 0.421 SWAP.HIVE and 2.895 SPS (1.058 Share) in the SWAP.HIVE:SPS pool.
So am I became a liquidity provider by doing this (holding this position)? What does this exactly mean? How am I helping the Splinterlands economy? Somehow I am helping, because I am receiving claimable rewards, but currently I do not really understand the concept of liquidity, and whether this is a high risk investment or not.
I would be happy for an easy-to-understand short description about what I am currently doing. Thank you.
Have a nice day. All the best. Greetings and much love from Hungary.