A launchpool in crypto is a fundraising method that helps new cryptocurrency projects get started while rewarding early investors.
I'll explain how these work and why they've become popular in the crypto world.
When you participate in a launchpool, you deposit your cryptocurrency tokens into a liquidity pool for a specific period. During this time, your deposited funds help provide liquidity for the new project. In return, you earn rewards in the form of the new project's tokens.
Think of a launchpool as a win-win arrangement. The project gets the funding and liquidity it needs to launch successfully, and you get to earn new tokens without directly purchasing them.
Here's how launchpools typically work:
- A new crypto project partners with a crypto exchange to create a launchpool
- You deposit your tokens (often the exchange's native token) into the launchpool
- Your tokens remain locked for a set period (usually a few weeks)
- You earn new project tokens based on how much you deposited and for how long
- After the launchpool period ends, you can withdraw your original deposit
Launchpools are sometimes called "Yield Farming" because they let you earn yield (interest) on your cryptocurrency. The earnings are calculated using an Annual Percentage Yield (APY) system that shows your potential returns.
The main benefit of joining a launchpool is getting early access to new tokens that might increase in value after they launch on exchanges. You also earn these tokens while keeping your original deposit safe.
However, remember that new crypto projects carry risks. The new tokens you earn might not perform well on the market, so it's important to research any project before participating in its launchpool.
Launchpools have become a standard feature on many major crypto exchanges because they benefit both new projects and investors looking for opportunities in the crypto market.
