


Take a Dive into DeFi with KCrypto, explaining all the basics revolving around liquidity pools
For traditional investors, a message: Forget everything you know about how markets work. This will make what I’m about to say much easier to digest.
What in The World is a Liquidity Pool?
Well, it’s exactly what it sounds like. A pool of liquidity. Before we go further, let’s set some ground rules:
- A liquidity pool is made up of two or more assets (Example: USDT and Ethereum. I will use this as my example throughout this series).
- Liquidity is provided by holders of the assets.
- An investor can sell one of the pool assets to the pool, in exchange for another asset within the same pool. Example: You sell Ethereum to the pool, and the pool sends you USDT.
- Investors pay a fee to the pool when exchanging an asset.
- Liquidity providers all share the fees paid by investors.
With these rules set, we can see that liquidity providers benefit from providing liquidity; they earn fees. Now you might wonder, how does the pool know how much Ethereum to give you if you sell USDT to it? This answer varies depending on where the pool is held, but it’s generally done by a scarcity/surplus formula. If I sell USDT in exchange for Ethereum to a pool, immediately following my transaction the pool has more USDT and less Ethereum. The next Ethereum purchased from the pool will be slightly more expensive. The same is true in reverse. If I sell Ethereum to the pool, there is now more Ethereum in the pool, making it slightly cheaper for the next buyer. Arbitrage traders can then spot opportunities for cheap or expensive Ethereum, and seek to capitalize on the opportunity. This ensures the price of Ethereum is consistent across pools and exchanges.

That Was Boring, I Know
But hear me out, that boring technical stuff is what makes this groundbreaking. We are all the market makers now. Investors no longer buy and sell from each other, but rather from the pool itself. This is known as automated market making. There is always a buyer, and always a seller, ready, on demand. I find that to be incredibly cool. Still bored? Let’s take this further.
New Income Potential
Say I hold Ethereum as a long term investment. It just hangs out, and my value is subject to volatile swings. I hope one day it’s worth more. It probably will be, but long term appreciating investments are not for every portfolio.
I can now pair my Ethereum with USDT in a pool, earning what I refer to as a dividend — the pool fees. This pair will also stabilize my Ethereum investment. Being paired with USDT means the Ethereum price movements will be half of what they would be on their own. If Ethereum doubles in value, half of that increase will be absorbed by the USDT side of the pool as they are always held in a 1:1 value ratio by arbitrage traders. This may not be ideal for the long term hold, but as they say, different strokes for different folks. This is what is known as impermanent loss, only becoming permanent when the investor withdraws their liquidity share from the pool. Also keep in mind, this is a loss on what could have been, not an actual loss of value.

Now, Let’s Boost it
Many platforms add an incentive on top the pool fee itself. The incentive is often a governance token, and holds its own value. Receiving this token can significantly boost returns, making a 20% to 30% yield on an Etherum/USDT pair fairly easy to find in the marketplace. Simply sell off the “bonus” token, and bank some extra cash. Over time, the extra yield with some possible appreciation from the pooled tokens can provide an excellent investment vehicle for those looking for stabilized returns with the chance of crypto-unique capital gains.
If you think 30% sounds great, then you will lose it when you meet yield farming. At this moment I am providing BNB paired with DOT as liquidity. I like both projects, and am not too fearful of incurring long term capital losses. I am confident that both cryptos will go up in value over time. Either way, I’m here for the sick yield. The pool is currently paying me an APY of 100.8% thanks to the pool fees + platform incentive token. Bonus points if you can name the platform. (Hint: Think breakfast food).

I think that’s good for now, we’ll dive further into food-based yield farms in the next chapter.
This is a paid press release, BSC.News does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products, or other materials on this page. The project team has purchased this advertisement article for $1500. Readers should do their own research before taking any actions related to the company. BSC.News is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods, or services mentioned in the press release.
This is a paid press release, BSC.News does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products, or other materials on this page. The project team has purchased this advertisement article for $2500. Readers should do their own research before taking any actions related to the company. BSC.News is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods, or services mentioned in the press release.
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Related News


Coinbase Gains Regulatory Nod from BMA for Retail Perpetual Futures Trading
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Building on the launch of its International Exchange in May, the approval reflects Coinbase's effort to extend perpetual futures trading to eligible non-US clients.
Summary
- Coinbase has obtained regulatory approval from the Bermuda Monetary Authority (BMA) to offer perpetual futures for eligible non-US retail customers.
- The approval builds on Coinbase's earlier announcement in May 2023 when it launched Coinbase International Exchange, a platform aimed at non-US institutions to trade perpetual futures.
Crypto exchange, Coinbase, in an announcement said it has obtained regulatory approval from the Bermuda Monetary Authority (BMA) to offer perpetual futures for eligible non-US retail customers. Aligning with the BMA's rigorous guidelines, the move underscores Coinbase's dedication to compliance and regulatory standards.
This approval builds on Coinbase's earlier announcement in May 2023 when it launched Coinbase International Exchange, a platform aimed at non-US institutions to trade perpetual futures. Now, the BMA's approval extends this trading option to non-US retail customers.
As of today, non-US retail traders can verify their eligibility for perpetual futures trading on Coinbase Advanced, the company's retail trading platform, with official trading operations set to commence in the coming weeks.
Coinbase’s “Go Broad, Go Deep” Expansion Strategy
“As announced in the Phase II of our “Go Broad, Go Deep” strategy, we are dedicated to partnering with high-bar global regulators to build a crypto regulatory framework that allows crypto technology to continually drive innovation,” Coinbase said.
While the company initially planted its roots in the United States, it now seeks to expand access to perpetual futures for eligible non-US clients, thus contributing to the evolution of the global financial system and extending economic freedom and opportunities to users worldwide.
In a climate where several crypto exchanges are facing increased regulatory scrutiny and scaling back operations in certain regions, Coinbase's expansion into perpetual futures demonstrates its determination to cater to growing demand in the crypto derivatives market while upholding security and transparency standards.
This is a paid press release, BSC.News does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products, or other materials on this page. The project team has purchased this advertisement article for $1500. Readers should do their own research before taking any actions related to the company. BSC.News is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods, or services mentioned in the press release.
This is a paid press release, BSC.News does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products, or other materials on this page. The project team has purchased this advertisement article for $2500. Readers should do their own research before taking any actions related to the company. BSC.News is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods, or services mentioned in the press release.
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