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CTSSHAH
@ctsshah
#LiquidityPool #CryptoLingo If you are unfamiliar with my #CryptoLingo please click on the hash tag to be redirected to a screen with my previous posts. I had left off on #DEX or decentralized exchange and this post helps build on it. Anyone familiar w/ Pancake Swap and #YieldFarming or #IFO ? The Breakdown: - "A liquidity pool is a crowdsourced pool of cryptocurrencies or tokens locked in a smart contract that is used to facilitate trades between the assets on a decentralized exchange (DEX)." (Cryptopedia) - A major limitation of a Decentralized Exchange system is liquidity or currency available for trading at enough volume where pricing is acceptable ... - The more users that pool their assets together, the better the DEX can function on par with the speed and convenience of a Centralized Exchange How do I find out more about Liquidity Pools: - "[Automated Market Makers] AMMs fix this problem of limited liquidity by creating liquidity pools and offering liquidity providers the incentive to supply these pools with assets, all without the need for third-party middlemen" - Cryptopedia - If interested in trading with a liquidity pool you could consider Bancor or Uniswap where you don't need a buyer or seller to match but exchange for tokens w/in liquidity pool using smart contracts - Do you have experience w/ liquidity pools ... please share in the comments! What should I know about a Liquidity Pool before investing? - "Instead of traditional markets of buyers and sellers, many decentralized finance (DeFi) platforms use automated market makers (AMMs), which allow digital assets to be traded in an automatic and permissionless manner through the use of liquidity pools." (Cryptopedia) - Liquidity Pools ensure sufficient volume so that the bid-ask spread is not too large and resulting trade price far exceeding market price. - "Usually, a crypto liquidity provider receives LP tokens in proportion to the amount of liquidity they have supplied to the pool. When a pool facilitates a trade, a fractional fee is proportionally distributed amongst the LP token holders." (Cryptopedia) What are the downsides of a Liquidity Pool for investing: - Yield Farming can be done to utilize liquidity pools by locking up your cryptocurrency to earn liquidity pool tokens in order to maximize earnings. - "This allows a crypto exchange liquidity provider to collect high returns for slightly higher risk as their funds are distributed to trading pairs and incentivized pools with the highest trading fee and LP token payouts across multiple platforms." (Cryptopedia) - You should also read about SushiSwap and the "vampire attack" that altered the DeFi community Reference: Cryptopedia / Video: https://www.youtube.com/watch?v=sxsOaO7LcPc P.S.: Initially I had used Public to explore new companies that I had not heard about and made a number of small purchases more to watch and track how that money would have done had I invested when I started watching. I've decided to sell off a number of these small to medium positions to clean up my portfolio so that it is easier to track and manage ... and to consolidate the funds into ones I am excited about w/in the Metaverse. Also, please don't mistake my excitement for the Metaverse as being anything other than a guess ... I don't know the future. #MakeTheWorldBetter
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