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Liquidity Pool Layers

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@chekohler
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Hey Jessinvestors

Liquidity pools have been around for some time now and have solved a pretty big issue in the crypto space, the issue of market depth. The reason many traders don't get into coins with big buys is that it can turn into a roach motel, you can check-in, but you can't check out.

If you do sell, it will incur considerable losses, so they have to hold their positions and try to exit possesions daily without disturbing the market. The issue with this is that by the time they unwind possessions, it could be too late to apply to a new trade.

Another issue was chain isolation; if I had value on ETH as an ERC-20 token, how do I get it to another chain without considerable losses trading pairs.

In the past, you would have to sell your USDT for another token and then convert it to that chains stable coin. Now with pools, and wrapping, atomic swaps and chain-bridges, we're able to leverage liquidity pools to pass value across various chains.

These liquidity pools provide permeable layers that we, as token holders, can pass through to find opportunities to leverage our value in different ecosystems. It may be clunky now, but what I see being built is going to change all that.

DE-FI is the jumping-off point

I imagine most people have seen the explosion in DE-FI and wondered what it's all about; why is the craze here, naturally its to make money, but there are two deeper issues at play with DE-FI.

One is to establish a yield curve for various crypto tokens, just like fiat money has a yield curve, bonds have it, credit has it, so too will crypto have it. DE-FI may be kicking off insane returns now, but in the future, it will be arbitraged down and eventually become the risk-free rate the market chooses per asset.

The other is to provide liquidity for ALL dapps in the ecosystem to leverage. In the past, if you had a utility token to use your dApp, it would be a pain to get it; now, with DE-Fi, you can token swap in with a few clicks and start using a dapp.

This gives dapps a bridge to a massive supply of liquidity, and I am sure after de-fi dapps establish all the pools needed, new dapps will come in and find better ways to use that value and the bridges created.

DE-FI is gobbling up tokens that would normally sit idle in wallets and giving it a purpose that helps the wider community and also deleverages us from the obvious pitfalls of centralised exchanges.

Wallets and dapps will leverage DEFI driven pools

I've only really known Binance to offer cross-chain swaps in its centralised service as well as token swaps, but now it's coming to dapps and wallets. Uniswap and forks like it now allow wallets like metamask to tap into liquidity pairs and offer quick swaps at spot prices.

This makes it easier for the end-user to move in and out without knowing how to set a market order. Yes, they will pay a premium for their swap, but for some, that's worth avoiding the hassle of loading up a DEX to do the swap.

Wallets of the future

I think it won't be long before more hot wallets with multi-chain nodes can offer not only in-chain swaps but cross-chain swaps.

In future, I could ping a USDT from my TRON wallet to someone who wants USDT on an ETH wallet, and neither of us would be the wiser. The coin and wallet would do all the hard work finding the right path at the quickest or most affordable route.

We can see this concept play out on the lightning network with a single asset right now, but I can see both liquidity pools and channel hopping along with token bridges being fused into one service pretty soon.

Have your say

What do you good people of HIVE think?

So have at it, my Jessies! If you don't have something to comment, "I am a Jessie."

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