In this week’s issue:

• Touch Grass: Reality Check on Liquidity Pooling (tldr: just hodl)

• Hodl Me Tender: 🔥 Web3, Crypto + AI Jobs of the Week

Hodl Me Tender: 🔥 Web3 + AI Jobs of the Week

Looking for your next move in (or into) web3, crypto, or AI? Here are some fire openings for this week, all remote, all posted within the last four days:

• Octant is on the lookout for a Social Media Lead 🔥

• Titan (Solana) needs a Mid/Senior Frontend Developer to join their team

• Pye (also Solana) is looking for a Staking Researcher

• Squad wants to find an Experienced Web3 Sourcer

• Trilitech is looking for a Head of Institutional Sales

• They (Trilitech) also need a new Web3 Technical Lead - DeFi 🔥

• Livepeer needs a Performance Marketing & Distro Lead—is it you?

• Monks needs a Senior Creative Developer - AI 🔥

• Gnosis is looking for an Ethereum Ecosystem Summer Intern

• Want to be a Technical Product Manager - Privacy/UCL at Hamsa? Get it. 🔥

Want to see your company's job listed here? Reply to this email and lmk.

Look, liquidity pools are genuinely cool technology that enable decentralized exchanges to function without traditional intermediaries. They're a key piece of DeFi infrastructure. What liquidity pooling advocates won't tell you: if you actually want to support the DeFi ecosystem, there are better ways to do it that don't involve subsidizing other people's trades.

I almost became a liquidity provider this week

Well, not really. Providing liquidity sounds so grown-up and financially sophisticated, doesn't it? Who me? Oh I'm just providing liquidity to decentralized exchanges while earning trading fees. Super caszh.

But then I did the math (even though I only kinda sorta understand basic math). And read some things. And simulated some scenarios. And realized that liquidity pooling is basically the DeFi equivalent of being a casino where you're not sure if you're the house (guaranteed to win over time because the odds favor you) or just another gambler.

Let me explain why I'm keeping my tokens in my wallet where they belong. Or at least exploring other, less risky avenues like staking of DeFi lending.

What even is liquidity pooling (no buzzwords no hype)

Liquidity pools are basically digital vending machines for crypto trading. Instead of having a traditional order book where buyers and sellers match up, automated market makers (AMMs) use pools of tokens to facilitate trades.

Here's how liquidity pooling works in theory:

• You deposit two tokens (say ETH and USDC) into a pool

• Traders swap between these tokens, paying fees

• You earn a cut of those fees

• Everyone wins! Or so they say.

The pool automatically maintains a balance between your two tokens using fancy math (specifically, the constant product formula x*y=k, which sounds impressive until you realize what it actually means for your portfolio).

Here's what actually happens in LP land:

• You deposit 1 ETH + $2,000 USDC when ETH = $2,000

• ETH pumps to $3,000 because crypto gonna crypto

• The pool automatically sells some of your ETH to maintain balance

• You withdraw less ETH than you started with

Congrats—you just got algorithmically day-traded by a robot.

The math that made me keep my tokens (and the studies that back it up)

Before I even ran my own numbers, I found some sobering research. A 2021 study by Bancor analyzed Uniswap liquidity providers and found that 50% of Uniswap liquidity providers are losing money due to impermanent loss.

Even more striking: more than 80% of the pools analyzed in the study saw LPs lose out due to impermanent loss.

Not exactly the kind of stats that inspire confidence.

Damn.

The researchers concluded that "impermanent loss surpasses the fees earned during this period" for almost all pools analyzed. They also found no statistical evidence that users who adjusted their positions more frequently performed better, suggesting that even "sophisticated" strategies don't necessarily help.

Perhaps most damning: "Overall, and for almost all analyzed pools, impermanent loss surpasses the fees earned… We have collected evidence that suggests both inexperienced retail users and sophisticated professionals struggle to turn a profit under this model."

With that sunny backdrop, I decided to run some numbers on what would happen if I provided liquidity to some popular pairs.

Example 1: ETH/USDC if ETH had pumped

• March 1: Provide 1 ETH + $2,200 USDC (ETH at $2,200)

• June 15: ETH hits $3,400

• If you'd just held: $3,400 in ETH value

• If you'd LP'd: ~0.78 ETH + $2,650 USDC = ~$3,300 total

• Impermanent loss: ~$100 plus whatever fees you earned

The fees would need to be substantial to make up that difference. And this is assuming ETH only went up 55%—imagine if it had pulled a classic crypto move and 3x'd.

Example 2: The brutal reality of volatile pairs 

Impermanent loss? In a pump? It gets real permanent, real fast.

The irony is the more volatile the pair (which generates more trading volume and fees), the more likely you are to get wrecked by impermanent loss. It's like being told the busier your lemonade stand gets, the more lemonade you have to give away for free.

The psychology of productive procrastination

Here's what I think is really happening with liquidity pooling: it's productive procrastination for crypto holders. Your tokens are just sitting there doing nothing, earning no yield, while you watch other people make money in DeFi. Providing liquidity feels like you're finally putting your crypto to work.

It’s the same logic that makes people trade their index funds because “the money is just sitting there.”

Your ETH doesn’t need a job. It’s already riding the largest programmable blockchain experiment in human history. That’s enough excitement for one asset.

When liquidity pooling actually makes sense (spoiler: not for me, probably not for you)

To be fair, there are scenarios where providing liquidity isn't completely insane:

If you're a protocol founder trying to bootstrap liquidity for your new token, providing LP might make strategic sense. You're trading potential profits for ecosystem growth.

If you’re managing millions and can absorb impermanent loss while earning meaningful fees on high-volume pairs—what up, whales.

If you're providing liquidity to stable pairs (USDC/USDT) and just want slightly better yield than keeping everything in USDC. Though at that point, just buy Treasury bills.

If you have inside information about token price movements. But that's just insider trading with extra steps and probably illegal.

For everyone else—people with normal amounts of crypto who just want their bags to grow—liquidity pooling is usually a sophisticated way to underperform holding.

The elegant solution: do less

After a week of research, I've reached the most boring conclusion possible: for most people, liquidity pooling is a complicated solution to a problem most of us don’t actually have.

Want your crypto to work for you? Buy quality assets, DCA if you're feeling fancy, and wait. Your ETH doesn't need to be earning trading fees to be valuable. Your BTC doesn't need to be locked in a pool to appreciate.

The DeFi space is full of people trying to optimize every basis point of yield, often at the expense of significant risk. But sometimes the right amount of optimization is zero optimization.

I'm keeping my tokens in my wallet, where they can go up or down in peace without being algorithmically day-traded by AMM bots. It’s like letting your houseplants just exist instead of constantly repotting them to maximize growth.

How to actually support DeFi without losing money

Here's the thing that liquidity pooling advocates don't want to admit: if you actually want to support the DeFi ecosystem, there are better ways to do it that don't involve subsidizing other people's trades.

Staking is the less exciting but actually profitable alternative. When you stake tokens, you're contributing to network security and earning real yield without impermanent loss risk. Your tokens stay your tokens—they don't get algorithmically rebalanced every time someone makes a trade.

Want to support DeFi projects? Stake their tokens instead of providing liquidity. You can contribute to network security through staking without risking impermanent loss. Unlike liquidity pooling, staking lets you support the ecosystem while actually keeping your tokens and earning predictable rewards.

It's not as sexy as talking about "earning trading fees" and "providing liquidity to AMMs," but it's what actually works for retail investors who want exposure to DeFi yields without getting slayed by impermanent loss.

My extremely unsophisticated takeaway

The more I learn about DeFi, the more I appreciate simple strategies. Liquidity pooling isn't inherently evil—it's just another tool that works better for protocols and whales than retail investors.

The promise of "earning yield on your crypto" is seductive, especially in a space where people regularly talk about 20% APYs like they're conservative estimates. But yield without risk doesn't exist, and the risk in liquidity pooling is often hidden in complex mechanisms that benefit from our misunderstanding.

My new rule: if a DeFi strategy requires me to understand impermanent loss, arbitrage dynamics, and fee accrual mechanics just to avoid losing money, it's probably not for me.

Coming from a poet who obsesses over em dashes, line breaks, and the syncopation of a stanza—it's refreshing to remember the most sophisticated move is sometimes doing the simplest thing.

PS: Subscribe now if you want in on this arithmetic. Miss the last issue? It’s right here. Also literally none of this is ever financial advice. I’m sharing what I learn through Babe, and perhaps you’ll learn from my mistakes. Hopefully, maybe, who knows, ily.