The crypto market has gone through several changes and innovations since it first emerged. A lot has changed in the use cases of cryptocurrencies. With DeFi, there are financial opportunities. But, things were not always this way. People either actively traded their assets or kept them on exchanges and hardware wallets prior to the rise of DeFi protocols.
The DeFi world was one of the turning points of the crypto market. The launch of several projects, such as KyberSwap, has unlocked multiple use cases for cryptocurrencies beyond trading and holding. DeFi enables users to use their assets as liquidity on lending protocols, decentralized exchanges, and liquidity pools on other types of protocols. We can say that DeFi revolutionized the game. In particular, DeFi made it possible to expand one’s assets by lending them to freshly formed trading platforms within the scope of DEXes and AMMS.
For exchanges established on the AMM model to succeed, contributors must provide liquidity. The exchange cannot accommodate traders who want to swap tokens if there is no liquidity. Parties are thus strongly motivated to compensate people who provide liquidity by later allocating trading fees as payment for their earlier contribution. The process of earning from the use of liquidity is dynamic and, historically, there have been two main approaches: yield farming and liquidity mining. Yield farming evolved from liquidity mining.
What Is Liquidity Mining?
Simply put, liquidity mining is a passive income strategy that enables cryptocurrency owners to make money off of their current holdings rather than keep them dormant. Here’s how it works: a decentralized exchange accepts assets as collateral in exchange for fees that are then proportionally distributed to each liquidity provider by the platform.
Liquidity mining was the first popular use case for DeFi and continues to be so today. It was present at the very beginning of DeFi’s ascent. But as the industry developed over time, it transitioned to yield farming, a different but related passive investment strategy.
Crypto investors are often seeking new ways to profit from their portfolios. So, many turned to liquidity mining when they saw how effective it was as a passive income strategy. It has become very valuable because it allows users to profit from cryptocurrency without having to make active investment choices along the way. One’s share of a liquidity pool determines the total benefits one receives.
The Advantages of Liquidity Mining
When investors contribute assets to liquidity pools, they can be confident in the returns on their investment. The following are the main advantages of DeFi liquidity mining:
The possibility of a high yield
Understanding that your yield is proportionate to the entire risk you take with your investment is crucial before you start liquidity mining. This fact makes liquidity mining a profitable technique for all types of investors. People simply earn proportionately to their investment. Many DEXes rely on a particular level of liquidity for traders who would like to exchange tokens for other cryptocurrencies. This method of providing liquidity encourages exchanges to compensate them for their contributions.
Return on investment typically takes the form of trading fees that are accrued any time trades take place on the exchange in question. Investors can effectively predict their returns before they invest. This is because their yields are determined by their portion of the liquidity pool.
Availability of native and governance tokens
The ability to distribute governance via native tokens in a manner that is comparatively equal is one of the main advantages of liquidity mining. Before there was cryptocurrency liquidity mining, token distribution was generally unjust and unbalanced. Due to the size of the assets that institutional investors had available to them, DeFi protocol programmers frequently favored institutional investors over those with lower capital.
Small and institutional investors alike have a fair opportunity to acquire native tokens in liquidity mining. Users are granted a specific number of votes within the DEXes they have invested in. Tokens from a specific exchange serve as governance rights.
Liquidity mining has a low entry barrier. This means that it does not require much technical knowledge, to begin with. However, despite the advantages of liquidity mining, there are potential risks involved.
For example, some of these risks are inherent to a project. It is often advised to carry out deep research before mining on any platform due to unforeseen situations such as hacks. There is also the potential for a rug pull. This means that the liquidity pool developers and protocol developers close the protocol and move all the funds in it. So, using a trustworthy project is a vital step to take.
Is Kyberswap the Perfect Tool for Liquidity Mining?
The Kyber Network is a multi-chain crypto trading and liquidity gateway. It links liquidity from many providers to facilitate trades at the best prices for traders. It also ensures that liquidity providers increase their earnings via capital efficiency.
Kyber Network has been around for a long time, so we can trust its credibility as a DeFi pioneer project. Kyber Network is behind KyberSwap, a decentralized exchange aggregator and liquidity protocol. KyberSwap links liquidity from various points to enable immediate token trading at the best rates and the highest rewards for token liquidity providers.
The One and Only "KyberSwap"
💕 Best Price Guaranteed
💕 Lower Slippage
💕 Higher Returns🎉 KyberSwap that the best Swap Platform that I ever known 🎉@Eljaboom
— Krystal Zwetta (@K_Zwetta) February 14, 2022
KyberSwap offers a service that is crucial to the DeFi space. It has the capacity to provide liquidity for dApps to function. KyberSwap has a revolutionary approach to liquidity. It aims to build a market where people can use any token at the best rates.
Since its debut, KyberSwap has been integrated into over 100 projects. And thousands of users have had access to over $7 billion in transactions. A total of 11 chains (Avalanche, Arbitrum, BitTorrent, Ethereum, Oasis, BNB Chain, Velas, Polygon, Cronos, Aurora, and Fantom) presently support KyberSwap.
Just gonna say.. I haven’t found a better swap service than @KyberNetwork kyberswap.. it’s DMM tech is amazing and aggregates all the DEX stuff out there. So you don’t have to know which platform has best rate because of the smart routing. Long proven team and product. Kyber 💚
— Magnetᴳᴹ 🧹🟩 (@GratefulMagnet) May 5, 2022
One feature that sets KyberSwap apart from other DEXes is its exclusive system. It makes use of TrueSight technology to find tokens that might become popular in the near future by analyzing price trendlines, trading volumes, and on-chain data.
KyberSwap Helps You Spot Tokens Before They Trend
Early Bitcoin adopters are some of the wealthiest folks today in the digital market. The crypto space is all about finding the next gem before everyone else does, and this seems like an uphill task. There are thousands of tokens in the DeFi space, and finding those with huge rewards could be tedious.
@KyberNetwork is one of the few shining beacons in the industry that believes in products, services, value and relationships <3
— Daniel Pidan (@GameFiDan) May 4, 2022
But, KyberSwap makes this process easier. It has an automated system, its Trending Soon tool, that scans through tokens on 11 chains and marks those with potential. As mentioned above, the system gets details from trade volume and on-chain data.
This automated process does not rule out carrying out your own research. Before making any financial commitment on any token, it is critical that you conduct your research. KyberSwap also provides easy services for liquidity providers. Anyone can use KyberSwap to deposit tokens and manage their funds effectively while accruing fees. This is made feasible by the enhanced liquidity pools offered by KyberSwap, which significantly increases capital efficiency and lower transaction slippage.
In Conclusion
In comparison to other platforms, liquidity providers achieve higher capital efficiency, pricing, volumes, and profits. Additionally, KyberSwap collaborates on mining liquidity with leading DeFi projects, offering additional incentives to help liquidity providers increase their profits.
The best part of it all is that KyberSwap is pretty accessible. Any trader or liquidity provider can enjoy these activities without restriction. KyberSwap is open, accessible, and verifiable on the blockchain. If you are looking for a project to grow your portfolio, this is one to try out.
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Disclaimer
The information discussed by Altcoin Buzz is not financial advice. This is for educational, entertainment, and informational purposes only. Any information or strategies are thoughts and opinions relevant to the accepted levels of risk tolerance of the writer/reviewers and their risk tolerance may be different than yours. We are not responsible for any losses that you may incur as a result of any investments directly or indirectly related to the information provided. Bitcoin and other cryptocurrencies are high-risk investments so please do your due diligence. This article has been sponsored by Kyber. Copyright Altcoin Buzz Pte Ltd.
