Decentralized Exchanges & Liquidity Providing

The widespread adoption of decentralized exchanges (DEXs) has completely revolutionized the way that cryptocurrency is bought and sold. DEXs such as Uniswap and PancakeSwap offers plenty of advantages when compared to their centralized counterparts (CEXs), such as access to a wider variety of tokens and trading pairs. What makes DEXs truly decentralized is the ability to buy, sell and hold cryptocurrency without the need for a central and custodial entity. CEXs provide their liquidity, whereas DEX users provide liquidity themselves. This gives users a greater degree of control over their funds and in turn more security.

In addition, DEXs eliminate the need for cumbersome processes such as sign-ups and logins. These processes cause friction which hinders the average user’s trading experience. Many cryptocurrency enthusiasts opt to use DEXs because of their increased level of privacy and accessibility. When using a DEX, users can instantly start trading by simply connecting a non-custodial wallet such as Blank Wallet to the platform.

What Are Liquidity Pools?

DEXs facilitate trades on-chain without the need for a centralized authority. Many users prefer DEXs due to their decentralized nature, yet they can be more difficult to understand than their centralized counterparts. Most DEXs rely on liquidity pools to function, whereas CEXs rely on a centralized entxity.

Showing how liquidity pools function on a centralized exchange.
Showing how liquidity pools function on a centralized exchange.
Showing how liquidity pools function on a centralized exchange.
Showing how liquidity pools function on a decentralized exchange.
Showing how liquidity pools function on a decentralized exchange.
Showing how liquidity pools function on a decentralized exchange.

Put simply, liquidity pools are collections of funds that are pooled together for the benefit of the decentralized finance (DeFi) ecosystem. Funds are locked in a smart contract and used to facilitate trading, lending, and other functions. Without liquidity pools, decentralized exchanges such as Uniswap and PancakeSwap would not be able to operate.

What Is Liquidity Providing?

Liquidity providers (LPs) add two different assets into a liquidity pool to create a market. After adding liquidity, LPs receive LP tokens which can be staked for rewards. LPs are rewarded for facilitating trades and making assets more liquid. They typically receive trading fees from the trades that happen in their liquidity pool, proportional to their share of the total liquidity provided. For example, Uniswap users pay a 0.3% LP fee when buying a token. This fee is then split between LPs proportionally. Projects can also choose to provide additional rewards to LPs to incentivize them even more.

DeFi depends on liquidity providers and liquidity pools. These smart contracts are the foundation of the DeFi ecosystem and are likely to be a mainstay of the space for the foreseeable future.

What Is Impermanent Loss?

Providing liquidity comes with its own set of risks. The main risk for liquidity providers is impermanent loss. In short, it’s the loss of dollar value that can occur when providing liquidity compared to holding an asset.

It can be explained as the difference between holding an asset and providing liquidity for an asset. Impermanent loss occurs when one asset diverges from another in a liquidity pool. Losses are made permanent when removing liquidity before the prices of the two assets in question have returned to the same price ratio as when liquidity was added. As a result, providing liquidity for volatile assets is a risk and that should be carefully assessed.

The following graph shows the effects suffered by LPs due to impermanent loss:

Providing Liquidity For $BLANK

In addition to Uniswap’s LP fees, you can also earn rewards for providing liquidity for the $BLANK token on Unicrypt. Integrating with Unicrypt has simplified the process for $BLANK liquidity providers and offered a range of benefits. These benefits include:

  • No minimum deposit is required to start earning rewards
  • No whitelist sign-ups
  • Rewards are distributed on a block by block basis instead of monthly
  • You can now remove liquidity without losing previous farming progress

Liquidity providers earn the usual 0.3% exchange fee provided by Uniswap as well as additional $BLANK rewards for providing BLANK-ETH LP tokens to the Unicrypt $BLANK farm.

The $BLANK farm is available on the list of Unicrypt farms here. Be aware that the new farm may not be visible on the first page of Unicrypt farms, so click through the pages if necessary. These farms typically last for one month. If you’d like to keep providing liquidity, be sure to unstake from the farm at the end of the month and begin staking in the new farm. This is vital as old farms cease to yield rewards.

Here’s a step by step guide on how to provide BLANK-ETH liquidity:

  • Step 1: Connect your wallet and deposit BLANK-ETH in exchange for LP tokens on Uniswap here
  • Step 2: Find the $BLANK farm on the list of Unicrypt farms here
  • Step 3: Click on the Stake button.
  • Step 4: Click Approve and confirm the transaction in your wallet
  • Step 5: Now that you’ve approved your LP tokens, click Stake

You can unstake your tokens at any time and harvest rewards as they become available! Unstaking will automatically harvest any available rewards.

About Blank Wallet

Blank Wallet is the most private, non-custodial crypto wallet.

Blank Wallet is the ultimate browser extension wallet for full financial privacy, without compromise. Unlock the full potential of Web 3.0 with privacy-enhancing smart contracts at your fingertips.

As crypto sees further adoption, on-chain privacy is quickly becoming a sought-after commodity. For newcomers and enthusiasts alike, blockchain’s lack of privacy poses a real security risk that stems the growth of cryptocurrency. Blank Wallet eliminates the friction faced by millions of users by making privacy accessible for everyone, everywhere.

The wallet uses battle-tested privacy-enhancing technology to protect your financial data. Cryptographic proofs allow users to deposit and mix their funds in a smart contract that renders them untraceable. When you want to make a withdrawal, Blank Wallet creates a fresh wallet address with no links to your history on the blockchain.

Anyone can easily install Blank Wallet and start reaping the benefits. Besides full privacy functionality, Blank Wallet comes packed with an array of features that go beyond privacy for a seamless user experience. With full Web 3.0 support, the wallet allows you to connect to any DApp and harness the power of the decentralized web.

Reclaim your financial privacy. GoBlank.

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