Liquidity Pools and an Intro to Uniswap V2
Our next lesson is where we need to take some action. Uniswap is a project that deserves recognition in that it is bring the actions of the elite to every single person that chooses to learn about it.
Introducing now, LiquidityThe availability of an asset to an individual..
Throughout time trading assets has been widely accepted as normal. It's funny that crypto is approaching a divergence where it will be easier to turn the crypto of your choice into dollars than it will be for any other asset in the world, and it's all thanks to the liquidity provided to Automated Market Makers(AMM's) like Uniswap. All it will take is the emergence of a Central Bank Digital Currency(CBDC) to really put us on the next level. Exchanging assets requires liquidity to facilitate the trade.
Liquidity poolsAccumulation of tokens that are locked in a smart contract. They are used to facilitate trading by providing liquidity and are extensively used by some decentralized exchanges, such as Uniswap are quite simply pools of those "liquid" assets, which in this case are any asset as long as they reside on the Ethereum blockchain(and possibly in the future, any blockchain). Liquidity miningLiquidity mining is a community-based, data-driven approach to market making, in which a token issuer or exchange can reward a pool of miners to provide liquidity for a specified token. is a new concept that enables the actors that are pooling a currency to benefit directly from the organization that is in charge of the pooled currency. Often liquidity mining programs will offer an incentive for providing in newly established liquidity pools to help spread out their currency to the people that will actually be using it, and partaking in governance protocols. Providing liquidity has it’s own inherent risks(Impermanent loss is the most often cited), but the rewards for providing liquidity and receiving a reward sometimes outweigh the losses that can occur because of “impermanent lossImpermanent loss happens when you provide liquidity to a liquidity pool, and the price of your deposited assets changes compared to when you deposited them.” especially if you are in it for the long haul.
“It’s comfy in the pool.”
Being a liquidity provider means something great. Think of the exchanges that have facilitated your trades in the past. You most likely paid a fee. One way or another, you are lining the pockets of the exchange of your choice, whether it be Fidelity, or Coinbase. Those fees are there to provide value to the company, and those that are invested in the company, in order to give a return on the investments of those that have contributed.
Queue up, Uniswap. Uniswap takes the fees that exchanges receive from their users and outright gives them back to those that are providing liquidity in a way that allows you to openly and freely use the system regardless of the amount of funds you hold, or even your credit rating..
The more I talk about Uniswap the better it sounds. In my opinion, this is one of the best opportunities for Blockchain, and what it represents. Uniswap takes the power from the elite and spreads it out amongst the casual.