What is Bitshares Blockchain Decentralized Liquidity Pools feature?
Bitshares Blockchain had started to support decentralized liquidity pools or what is so called automated market making (AMM) starting from BitShares core version 5.0.
Bitshares Blockchain liquidity pools enable you to create your own decentralized liquidity pool between any two assets existing on BitShares Blockchain; while giving you the ability to decide taker fees percent and withdraw fees percent for the exchange and withdraw operations between the two assets within the liqudity pool.
Bitshares Blockchain liquidity pools enable you to stake your assets and share in the market fees accumulated through the making of markets configured in any existing liquidity pool on BitShares Blockchain.
Where to find liquidity pools
As you can see in the above screenshot, there are multiple liquidity pools which use XBTSX.USDT; I like the look of the XBTSX.USDT:XBTSX.USDC & XBTSX.USDT:XBTSX.BUSD liquidity pools as they’re just providing liquidity between different types of dollar tokens in exchange for the taker fee listed alongside the liquidity pools which feels less risky than providing liquidity between two volatile assets, however your personal risk tolerance depends on many scenarios.
Who can make one of these liquidity pools?
Any Bitshares Blockchain user is able to create liquidity pools on Bitshares blockchain.
So, if there’s a trading pair which you want to provide liquidity for whilst earning taker fees for making said 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 several liquidity pools which all compliment one another, growing liquidity and providing additional value to liquidity participants through the distribution of collected fees.
Why are liquidity pools beneficial?
They improve liquidity in a specific market trading pair, meaning it’s easier to buy and sell closer to the real market rate the trading pair is going for.
As a liquidity pool liquidity 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 turn out to be significantly over leveraged or bankrupt; you can avoid this scenario by choosing decentralization over multiple additional layers of middlemen between yourself and yield on your token of choice.
How do liquidity pools compare to credit offers?
Liquidity pools are entirely automated, so as soon as you join it, you no longer have to do anything.
Credit offers on the other hand, as a lender, you’ll need to top up your credit offers if the available borrowable assets are depleted & you will need to adjust the accepted amount of backing collateral somewhat similarly to publishing smartcoin price feeds occasionally.
There’s certainly room for both to exist on the Bitshares blockchain, and both have their unique use cases which you can take advantage of to earn crypto with existing crypto in a decentralized manner.
Credit offers you can control the minimum borrowable amounts, and you can apply greater fees than liquidity pools charge for market making.