Single-Sided Liquidity Provision excels at user accessibility and capital flexibility by allowing depositors to supply a single asset, bypassing the need for a 50/50 pair. This model, popularized by protocols like Aave and Compound for lending, and Curve Finance for stablecoin pools using wrapped assets, significantly lowers the barrier to entry. For example, a user can supply only ETH to earn yield without being exposed to an automated market maker's (AMM) impermanent loss from a paired asset like USDC.
LABS
Comparisons
Single-Sided Liquidity Provision vs Paired Provision
A technical analysis comparing capital efficiency, risk exposure, and protocol integration for single-asset deposits versus traditional 50/50 paired liquidity provision on DEXs.
Chainscore © 2026
introduction
THE ANALYSIS
Introduction
A foundational comparison of capital efficiency and risk profiles in modern DeFi liquidity models.
Traditional Paired Provision takes a different approach by requiring equal value of two assets, as seen in classic Uniswap V2-style AMMs. This strategy results in deeper, more stable liquidity for trading pairs but introduces the impermanent loss trade-off for LPs. The model is foundational for price discovery of long-tail assets and is quantified by metrics like Total Value Locked (TVL), where Uniswap consistently leads with billions locked in paired pools.
The key trade-off: If your priority is capital efficiency and simplified risk management for users providing mainstream assets, choose Single-Sided models. If you prioritize maximizing fee revenue and providing liquidity for volatile or novel trading pairs where deep pools are critical, choose Paired Provision. The decision hinges on whether you are optimizing for depositor convenience or for the liquidity depth of a specific market.
tldr-summary
Single-Sided vs Paired Liquidity
TL;DR: Key Differentiators
A direct comparison of capital efficiency, risk, and protocol fit for liquidity providers.
01
Single-Sided Provision
Capital Efficiency & Simplicity: Deposit a single token (e.g., ETH) into a pool. No need to manage a 50/50 ratio, reducing complexity and gas costs for rebalancing. This matters for protocols like Aave or Compound where you earn yield on a collateral asset, or for Curve meta-pools where one side is a stablecoin.
02
Single-Sided Provision
Targeted Exposure & Reduced Impermanent Loss (IL) Risk: Avoids direct exposure to a volatile paired asset. IL is typically lower or non-existent if the pool pairs your asset with a stablecoin. This matters for institutions or long-term holders who want yield on a specific asset (e.g., stETH) without taking on correlated pair risk.
03
Paired Provision
Higher Potential Yield & Deeper Liquidity: Often offers higher APY from trading fees, especially in volatile pairs on DEXs like Uniswap V3 or PancakeSwap. Essential for providing the core liquidity that enables efficient swaps. This matters for professional LPs and market makers optimizing for fee income in active trading pairs.
04
Paired Provision
Capital Intensive with Managed Risk: Requires a 50/50 value split (e.g., ETH/USDC), locking twice the capital. Exposes LPs to Impermanent Loss, which can outweigh fees in highly volatile markets. This matters for sophisticated providers using concentrated liquidity strategies and active management tools like Gamma or Visor.
SINGLE-SIDED VS. PAIRED LIQUIDITY PROVISION
Feature Comparison Matrix
Direct comparison of capital efficiency, risk, and operational complexity for DeFi liquidity strategies.
| Metric | Single-Sided Provision | Paired (AMM) Provision |
|---|---|---|
Capital Exposure | Single Asset | Two Assets (50/50 Split) |
Impermanent Loss Risk | None | High (Price Divergence) |
Typical APY Range | 2-10% | 10-100%+ (Varies with Volatility) |
Protocol Examples | Aave, Compound, Lido | Uniswap V3, Curve, PancakeSwap |
Entry Barrier | Low (Deposit & Forget) | Medium (Requires Rebalancing) |
Gas Cost for Entry/Exit | $5-20 | $20-100+ (Multiple TXs) |
Dominant Use Case | Yield on Idle Assets | Market Making & Trading Fees |
pros-cons-a
A Strategic Comparison
Single-Sided Liquidity: Pros and Cons
Choosing between single-sided and paired liquidity is a foundational decision for protocol architects and treasury managers. This comparison breaks down the key operational and financial trade-offs.
01
Single-Sided: Capital Efficiency
No Impermanent Loss Exposure: Providers deposit only one asset (e.g., ETH), eliminating the risk of divergence loss from a paired asset's price movement. This is critical for long-term holders and treasury diversification strategies where asset retention is a priority. Protocols like Lido (stETH) and Aave (aTokens) leverage this model.
02
Single-Sided: Simplicity & Accessibility
Lower Barrier to Entry: Users don't need to acquire a 50/50 pair, simplifying onboarding. This drives higher TVL for blue-chip assets and new token launches. For example, Curve Finance's crvUSD pools allow stablecoin holders to earn yield without exposure to volatile crypto pairs, attracting billions in deposits.
03
Paired Provision: Higher Base Yield
Dual Fee Generation: LPs earn trading fees from both assets in the pair, often resulting in higher Annual Percentage Yield (APY) compared to single-sided staking. This is optimal for active yield farmers on DEXs like Uniswap V3 and PancakeSwap, where concentrated liquidity can amplify returns.
04
Paired Provision: Deep Liquidity & Price Stability
Foundation for DEXs: Paired pools create the deep, continuous liquidity required for efficient swaps, minimizing slippage. This is non-negotiable for Decentralized Exchange (DEX) core infrastructure and oracle price feeds. The Uniswap V2/V3 WETH-USDC pool, with over $2B TVL, is the backbone of Ethereum DeFi.
05
Single-Sided: Con - Reliant on Protocol Incentives
Yield Often Subsidized: Rewards are frequently powered by token emissions (e.g., governance tokens) rather than organic fee revenue. This creates sustainability risk if emissions taper. Protocols must carefully manage tokenomics, as seen in the "merkle drop" models of early liquidity mining programs.
06
Paired Provision: Con - Impermanent Loss Risk
Principal Volatility: LPs are exposed to divergence loss, which can outweigh earned fees in volatile markets. This is a major deterrent for conservative capital and makes the model poorly suited for correlated asset pairs during market shocks. Tools like Gamma Strategies and Charm Finance offer hedging solutions.
pros-cons-b
Single-Sided vs. Paired Provision
50/50 Paired Liquidity: Pros and Cons
Key strengths and trade-offs for CTOs evaluating core AMM architecture. Decision hinges on capital efficiency, risk profile, and target user base.
01
Single-Sided Provision: Capital Simplicity
Lower barrier to entry: LPs deposit a single asset (e.g., USDC or ETH), avoiding the need to manage a 50/50 portfolio. This matters for protocols targeting retail users or new token launches where paired liquidity is scarce. Protocols like Trader Joe's Liquidity Book and Balancer's Managed Pools use this to bootstrap new markets.
02
Single-Sided Provision: Concentrated Risk
Higher impermanent loss exposure: LPs are fully exposed to the volatility of the single asset they provide versus the pool's paired asset. This matters for volatile assets or new tokens, where IL can exceed fees earned. Requires sophisticated risk models or hedging (e.g., using GammaSwap or Panoptic options) to manage effectively.
03
50/50 Paired Provision: Capital Efficiency
Optimal liquidity depth: The classic Uniswap V2 model provides deep, balanced liquidity, minimizing slippage for large trades. This matters for blue-chip pairs (ETH/USDC) and CEX-level DEXs where trade execution is paramount. TVL in 50/50 pools often exceeds $1B+ for major pairs, ensuring stability.
04
50/50 Paired Provision: Capital Lockup
Inefficient asset allocation: Requires locking equal value of two assets, reducing capital flexibility. Half of an LP's capital is in a non-preferred asset. This matters for institutions or whales with specific portfolio strategies. Solutions like Uniswap V3 concentrated liquidity evolved to mitigate this by allowing asymmetric positions.
CHOOSE YOUR PRIORITY
When to Use Which: A Strategic Guide
Single-Sided Provision for DeFi
Verdict: The default for yield-bearing assets and composable money markets. Strengths: Unlocks deep liquidity for stablecoins (e.g., Aave's aTokens, Compound's cTokens) and LSTs (e.g., Lido's stETH) without requiring a paired asset. Enables seamless integration with lending protocols and leveraged strategies. Superior capital efficiency for assets with inherent yield. Key Protocols: Aave, Compound, Lido, EigenLayer.
Paired Provision for DeFi
Verdict: Essential for DEXs, price discovery, and bootstrapping new token pairs. Strengths: Creates the foundational liquidity pools for decentralized exchanges like Uniswap V3 and Curve. Provides explicit price ranges and concentrated liquidity. Critical for trading pairs, LP token generation, and impermanent loss hedging strategies. Key Protocols: Uniswap V3, Curve, Balancer, PancakeSwap.
LIQUIDITY PROVISION
Technical Deep Dive: Mechanics and Integration
A technical breakdown of the core mechanisms, capital efficiency, and integration complexity for single-sided and paired liquidity models.
Single-sided liquidity is generally more capital efficient for the provider. It eliminates the need to source a second asset, allowing 100% of capital to be allocated to a single token. This is the core advantage of protocols like Uniswap V3, where concentrated liquidity further amplifies efficiency. In contrast, paired provision (e.g., traditional AMMs like Uniswap V2) requires a 50/50 split, locking half your capital in an asset you may not want exposure to, which can lead to impermanent loss on both sides of the pair.
verdict
THE ANALYSIS
Verdict and Strategic Recommendation
A final assessment of the capital efficiency, risk, and strategic fit for single-sided versus paired liquidity provision.
Single-Sided Provision excels at capital efficiency and accessibility because it eliminates the need to manage a paired asset, reducing upfront capital requirements and impermanent loss exposure. For example, protocols like Aave and Compound allow users to supply a single token like USDC, earning yield from borrow demand, which can achieve APYs of 3-8% on stablecoins without direct market-making risk. This model is ideal for protocols seeking to bootstrap TVL quickly or for users with concentrated token holdings.
Paired Provision takes a different approach by requiring equal value of two assets to facilitate direct trading. This results in a trade-off of higher potential returns from trading fees against significant capital lockup and impermanent loss risk. Automated Market Makers (AMMs) like Uniswap V3 and Curve rely on this model, where concentrated liquidity can generate substantial fee revenue (e.g., 10-100%+ APY in volatile pools) but requires active management and exposes LPs to the relative price movements of the pair.
The key trade-off is between capital flexibility and yield complexity. If your priority is risk-managed, simple yield on a specific asset or you are a protocol architect designing for mainstream user adoption, choose Single-Sided Provision. If you prioritize maximizing fee revenue from active trading markets and have the expertise to manage concentrated positions and IL, choose Paired Provision. The decision ultimately hinges on your target users' risk tolerance and your protocol's core dependency on deep, customizable liquidity.
ENQUIRY
Get In Touch
today.
Our experts will offer a free quote and a 30min call to discuss your project.
NDA Protected
Confidentiality24h Response
Time to ValueDirectly to Engineering Team
No Sales Fluff10+
Protocols Shipped
$20M+
TVL Overall