DeFi - Introduction to Liquidity Pools

Liquidity pools are crucial for peer-to-peer trading in DeFi. Liquidity is the ability of an asset to be sold or exchanged quickly and without affecting the price. In other words, liquidity is a measure of how easily an asset can be converted.

Traditional exchanges use order books:

Q: What if I want to buy/sell large amounts?

Problem 1: Price moves for several levels.

Problem 2: There may not be enough liquidity.

Why are liquidity pools useful?

  • enable users to trade on DEXs
  • eliminate middlemen and centralized entities
  • Liquidity providers get incentives

Liquidity Providers

Go to Devnet Wallet and use the Faucent tool to get some xEGLD.

Use Devnet Maiar DEX to be a liquidity provider:

  1. Login with your wallet;
  2. Go to Swap tab;
  3. Swap 1 EGLD to USDC. Who provided the USDC for you to swap?
  4. Go to Liquidity tab;
  5. Add Liquidity: Use EGLD and USDC tokens;
  6. Perform several swaps;
  7. Remove Liquidity;
  8. Compare tokens in (provided when added liquidity) to tokens out (obtained when removed liquidity). If swaps were made in between, you should have gained some value from fees.
fob/laboratoare/07.txt · Last modified: 2022/12/14 20:06 by costin.carabas
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