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While liquidity pools present opportunities for generating income, they are not without risks. It's crucial for potential liquidity providers to conduct thorough research regarding the assets involved in each pool. Assessing how each asset functions within the DeFi space will give insight into the potential exposure and volatility associated with investing in particular pools.
For instance, one may observe that certain pools offer attractive APRs but involve meme coins or cryptocurrencies with uncertain future prospects. In such cases, investors must weigh the potential for profit against the risks of investing in less established assets.