Choosing between single-sided and dual-sided liquidity depends on your holdings, market view, and management preferences. Each approach has distinct advantages.
Dual-Sided (Traditional)
You deposit two tokens in equal value. Pros: full fee earning, transparent mechanics, wide protocol support. Cons: need both tokens, full IL exposure on both directions.
Single-Sided
You deposit one token; the protocol handles pairing. Pros: deposit what you have, maintain primary token exposure, may include IL protection. Cons: hidden conversion costs, protocol token exposure, limited availability.
When to Use Each
Dual-sided: When you hold both tokens, want maximum fee earning, prefer transparent mechanics.
Single-sided: Strong conviction in one asset, tax optimization needs, IL protection available.
Many sophisticated LPs use both strategically based on specific position goals.