This week wrapped Leo, an ERC token on the ethereum blockchain was launched on Uniswap, a dApp or decentralized application on ethereum blockchain. As many of you are excited and eager to participate in this venture I suggest you watch the videos put out by @leofinance about the process of swapping Leo for wrapped LEO, in the new Leofinance wallet so it's easier for you to participate in this investment. The videos are literal walk throughs of the process for swapping Leo for wrapped Leo, connecting your Hive wallet to Uniswap, connecting your etherium wallet to Uniswap and how to find, open and add Liquidity to the WLEO-ETH pool.
This operation takes Leo outside the Hive ecosystem and pegs the price of Leo to ETH in a sense and in the past this move has created rapid appreciation in the value of Leo and WLEO, making either one a very good short term investment for investors, but better yet the design of the current pool breaks the mold for typical liquidity pools, which normally generate earnings for investors purely from transaction fees. The WLEO-ETH pool rewards Liquidity Providers with a constant or permanent share of the daily reward pool. This is unique in cryptocurrency and very enticing to investors. Estimated yields for this pool are now in the 50% range.
As I watch this pool grow I also noted a rise in the WLEO price and LEO price. Leofinance has incorporated quick and easy signups and Hive accounts for these new investors and reasons for them to trade on hive-engine, creating more utility for hive token and users of the hive blockchain. Never forget that Leo is one of several successful second layer communities and like the others it is dependent on the first level infrastructure Hive.
In case this brief report on WLEO has peaked your interest here is a quick summary of what being a liquidity provider is all about.
The definition of being a Liquidity Provider, is one who deposits dollar equivalents of trading pairs into the trading pools in exchange for a portion of the transaction fees paid by traders who trade or swap assets on these decentralized exchanges. It is the equivalent of being a Market Maker on a stock exchange providing a particular stock for all buyers and cash for all sellers of that particular stock. In exchange you collect fees. One of the biggest secrets about the stock market is that the market makers don't get ric=h speculating on stock prices, they get rich on transaction fees paid by investors speculating on the price of stock. Providing Liquidity is profitable and safe, so it is attracting investors from outside of cryptocurrencies usual ranks, and it has resulted in billions of dollars moving into DEFI this year.
Another important concept to understand when you are proving liquidity is what's called a dollar equivalent pair. Dollar Equivalent Since the ERC token wrapped Bitcoin represents one Bitcoin and all its value, if Bitcoin is worth 4000 dollars USD and Ethereum is worth 400 dollars USD, then one wrapped Bitcoin, WBTC is worth 4000 dollars USD. Furthermore, in DEFI, since one Bitcoin valued at 4000$ would be worth ten Ethereum worth 400 dollars USD.
In the example above, where for simplicity, I said if Bitcoin was worth $4000.00 and Ethereum was worth $400.00, a Dollar Equivalent Trading Pair would contain One Bitcoin to Ten Ethereum. So if you wanted to provide Liquidity to a Trading Pair on a decentralized trading exchange, you would need to possess both Bitcoin and Ethereum in a ten to one ratio. Fortunately you don’t need a whole Bitcoin or a whole Ethereum, just a ten to one ratio in value.
So if you wanted to earn money without selling your cryptocurrency, you could become a Liquidity Provider on a decentralized cryptocurrency swap exchange. If you become a Liquidity Provider, the platform pays you a percentage of all the transaction fees for swaps or trades done that day, for the trading pair you provide liquidity for. As long as there’s lots of transactions or large monetary incentives being a Liquidity Provider can be very profitable.
As always research these opportunities careful, so you understand the risks.
Posted Using LeoFinance Beta