What is the function of Bitshare’s blockchain decentralized liquidity pools?
Bitshares blockchain had started to support decentralized liquidity pools or what is known as automated market making (AMM) from BitShares core version 5.0.
Bitshares Blockchain Liquidity Pools allow you to create your own decentralized liquidity pool between any two assets that exist on the BitShares Blockchain. At the same time, you have the ability to set the taker fee percentage and withdrawal fee percentage for the exchanges and withdrawals between the two assets within the liquidity pool.
Bitshares Blockchain Liquidity Pools allow you to stake your assets and participate in the market fees incurred by creating markets configured in any existing liquidity pool on BitShares Blockchain.
Where to find liquidity pools
As you can see in the screenshot above, there are multiple liquidity pools using XBTSX.USDT; I like the look of liquidity pools XBTSX.USDT:XBTSX.USDC and riskier than providing liquidity between two volatile assets, however your personal risk tolerance depends on many scenarios.
The only thing about finding liquidity pools in the web-based wallet is that you need to know which assets need liquidity in order to proceed. For this reason, using the Blocksights Pool Explorer can be helpful when searching for liquidity pools on the Bitshares DEX.
Who can create one of these liquidity pools?
Any user of the Bitshares blockchain can create liquidity pools on the Bitshares blockchain.
So if there is a trading pair that you want to provide liquidity on and at the same time earn taker fees for making that market, you can create the liquidity pool to enable this automated market making on your behalf for your configured trading pair.
Some community members have created multiple liquidity pools that complement each other, increasing liquidity and adding value to liquidity participants through the distribution of fees collected.
Alternative:
- The open source liquidity pool tool PoolTool Bitshares
- Via Beet JS/QR/TOTP scripts
Why are liquidity pools beneficial?
They improve liquidity in a given market trading pair, meaning it is easier to buy and sell closer to the actual market price that the trading pair is targeting.
As a liquidity pool provider, you benefit from being able to earn more tokens from your existing tokens without leaving the decentralized exchange on the Bitshares blockchain.
Too often lately, centralized liquidity pool platforms have proven to be significantly over-indebted or bankrupt; You can avoid this scenario by opting for decentralization via several additional layers of intermediaries between you and your preferred token.
How do liquidity pools compare to loan offerings?
Liquidity pools are fully automated, so once you join them, you don’t have to do anything.
With credit offers, on the other hand, as a lender, you need to increase your credit offers when the available lendable assets are depleted, and you need to adjust the amount of collateral accepted, similar to the occasional smartcoin price feed publication.
There is definitely room for both on the Bitshares blockchain, and both have their unique use cases that you can leverage to earn crypto from existing cryptocurrencies in a decentralized way.
Credit offerings allow you to control minimum credit amounts and charge higher fees than market making liquidity pools charge.
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