Single-asset pools are used by platforms like Aave, Bancor or Compound and they only contain one type of token such as just ETH or USDC or DAI tokens.

Users who add tokens to these pools are called liquidity providers, or LPs for short. Liquidity provision is at the core of Decentralised Finance, and a great starting point for anyone looking to get into DeFi.

These platforms then allow pooled tokens to be used by the market. In exchange for being able to use the liquidity being provided by these tokens, market participants will pay interests or fees for their use of this liquidity.

The amount of interest or fees that are earned by liquidity providers really depends on the market demand for liquidity in that token.

Two sided pools are used by automated market maker platforms like Uniswap and Sushiswap. Two sided pools always have two different tokens, for example USDC and ETH is a popular two sided pool on both Uniswap and Sushi Swap.

Automated market makers are a new type of exchange, where the two sided pools allow quick and easy swapping between one asset type and the other - for example between USDC and ETH. The bigger the pool, the easier it is for the market to swap larger and larger amounts of these tokens. As trading is very popular in DeFi, these pools are used a lot.

Every time someone trades across these pools, the liquidity providers earn a little piece of the trading fees. As a result of the popularity of trading in DeFi, the trading fees can quickly add up and returns of 15% or more per annum in just trading fees is quite normal for liquidity providers to earn at the moment.