How to become a market maker

A step-by-step guide to building a liquidity pool and earning deployed assets

“In schools you learn how to work for money, but not how to make money work for you.” © Robert Kiyosaki

The DeFi space offers great opportunities to make money from crypto assets. In this guide, we look at liquidity pools – one of the most common DeFi tools.

• What is a liquidity pool and how can market makers and traders make money from it?
• How can I create a liquidity pool? 1 inch Platform?
• How are assets made available to a liquidity pool?
• How can I exchange my share of a liquidity pool for underlying assets?

What is a liquidity pool and how can market makers and traders make money from it?

A liquidity pool is a pool of tokens tied to a smart contract. People provide liquidity to a pool to earn interest income derived from swap fees.

For example, if a user needs to exchange ETH for DAI, they can turn to a liquidity pool as they have enough ETH and DAI to perform an exchange. Users pay an exchange fee to exchange their tokens in a liquidity pool.

The total amount of fees charged is divided among all liquidity providers in the pool according to their share.

How can I create a liquidity pool on the 1 inch platform?

Go to EARN Section to 1 inch and click Plus Button.

Select the underlying pool assets (e.g. GST2 and DAI as in the screenshot). In order to create a pool and provide liquidity in a transaction, you need to unlock the sub-tokens. Click the Unlock button to allow the UniswapV2 router smart contract to conduct transactions with the selected amount of assets. You can also deploy the infinity unlock by clicking on the “Unlock infinity” button.

Confirm the transaction in the MetaMask confirmation pop-up window.

Now we are ready to create a pool. To do this, click the 🌟 Create pool and provide liquidity button. Only one pool per asset pair is available for Uniswap V2.

Confirm the pool creation in the MetaMask confirmation pop-up window.

Here we are! The GST2<>DAI pool has been created. Now you can provide more liquidity (or subtract existing liquidity) by clicking the plus (minus) button.

With 1 inch platform you can provide liquidity to a pool with each token! Source tokens are converted into underlying tokens at the best rates available in the market.

You can also withdraw liquidity from a token in the same way!

Earn with 1 inch! Visit https://1inch.exchange/#/earn.

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