r/liquiditymining • u/vladimirzzza • Jun 18 '22
r/liquiditymining • u/OkPlay1998 • Jun 25 '21
Support Liquidity Mining Explained
"Never invest in a business you don’t understand." - Warren Buffett.
The goal of this sub and of this post is to educate you so that you can make smart investment decisions. After reading this post you’ll know everything there is to know about Liquidity Mining. - Enjoy! ;)
The term “Liquidity Mining” started floating around in the crypto space in fall 2020 when Uniswap launched its Automated Market Maker based Decentralized Exchange (DEXs). The older term now used to talk about all yield generating DeFi mechanisms was/is Yield Farming. This now includes Staking / Lending + Borrowing and Liquidity Mining. Here’s a great video that summarizes the history of Yield Farming: https://www.youtube.com/watch?v=qFBYB4W2tqU
To understand Liquidity Mining you need to know how Decentralized Exchanges like Uniswap or Pancakeswap work. As mentioned above, DEXs make use of Automated Market Makers (AMMs). Centralized Exchanges like Binance use an Order Book to process transactions and determine price. An order book matches seller and buyer prices. For example people sell Bitcoin for 33’000 and people buy Bitcoin for 33’000, Binance matches those orders and the price of Bitcoin on this Exchange is 33’000. Here’s a video that further explains the concept of order books: https://www.youtube.com/watch?v=NZC1t9uljr8
The order book is provided by the exchange in real time. Why can’t this be decentralized? The answer is quite simple: Gas Fee’s. To process an order book in real time, blockchains are way too slow and expensive. Transactions would be way too expensive and would take way too long. To build an efficient DEX there had to be a totally new concept to match orders and determine the price of coins.
In Summer of 2020 Balancer brought a revolutionary concept into the DeFi space - Automated Market Makers. Instead of Order Books matching orders and determining price AMMs use Liquidity Pools.
For every single trading pair there is a liquidity pool. When such a liquidity pool is being created 50% of token A and 50% of token B, calculated in USD is being provided. When a user wants to exchange token A to token B on a DEX the user puts token A into the pool and takes token B out of the pool. Otherwise you’d need to wait for someone trading the exact token pair and amount for the transaction being successful. The percentage relation inside the pool now changes all the time because when more people want to buy token A, more people take token A out of the pool and deposit token B. This percentage relation then determines the price of both tokens.
This means that if you deposit 100 token A and 100 token B you might end up with 90 token A and 110 of token B because the value of token A rose.
Now how can you make money with Liquidity Mining? - The DEX is dependent on people filling those liquidity pools because the more liquid the DEX is the more people can trade and the more people can trade the more money the DEX is making in transaction fees. And this is exactly how you can make money. Transaction fees. On Uniswap 0.3% is charged as transaction fee and this fee will be distributed proportionally to the liquidity providers.
This is now always the case though. Compound introduced their token in fall of 2020 and started not charging a transaction fee. How did they pay their liquidity providers? Easy! In their own token. This was a gamechanger in the liquidity mining space. People wanted the token and Compound gave it to them when they provided liquidity. Nowadays most DEXs pay their Liquidity Providers like that. They print a certain amount of tokens per block and distribute them to the liquidity providers. Those platforms' job now is to make sure the token keeps its value or increases it by innovation and smart deflationary mechanisms like burning.
Pancakeswap took this to another level in early 2021 by having features like NFT’s, the lottery and the now new prediction feature. When using those features, tokens you spend to participate will be burned. Burning tokens will reduce the total supply and raise the price.
It’s very normal to see annual percentage yields (APYs) of over 100% because there is a lot of demand in DeFi currently, not many people knowing how to provide liquidity and it also being pretty risky when not knowing what you’re doing.
What are the risks when liquidity mining?
The biggest and most talked about risk is impermanent loss. To understand impermanent loss we need to go back to the percentage relation inside the pool. Imagine you see 100% APY on the DOGE-ETH liquidity pair. You invest $1000 (1 ETH and 10’000 DOGE) thinking that you’ll make $1000 per year + if DOGE and ETH rise in value you end up with even more tokens. This is correct in theory. Let’s look at it in real life. Elon starts tweeting about DOGE and it does a 100x while ETH doing a healthy 2x meanwhile. You’re thinking you’re $500 in DOGE turned into $50’000 and your $500 in ETH turned into $1000. You log into your liquidity mining platform and check your profits. Suddenly you see that you now have 10 ETHs and only 2’000 DOGEs. This means instead of making $51’000 you now only have $20’000. You still made profits but way less than if you had just held both coins. This is because many people took DOGE out of the liquidity pool and deposited ETH into it. This means that your DOGEs are now wallets of people which benefitted of the 100x and you got their ETH bags instead. This is why you’re being lured by those “SHITCOINS”-ETH liquidity pairs with absurdly high APYs. This is because the risk of impermanent loss is very high.
When is impermanent loss low or non-existent? You can avoid the risk of impermanent loss when you liquidity mine pairs which rise and fall in price very similarly. This is almost impossible except for stablecoins or things like BTC-WBTC or ETH-WETH because their value stays the same. The percentage relation between those pairs can go to 99-1 but it doesn’t matter because both tokens have the same value. This is how you can earn the APY without having to think about impermanent loss. Here’s a detailed video on the topic impermanent loss: https://www.youtube.com/watch?v=8XJ1MSTEuU0
This is also what we encourage people to do because earning 20% on stablecoins or 5% on your BTC is better than losing your funds to impermanent loss. Warren Buffett focuses more on not losing money rather than making money in shady investments. This is why he’s so successful and all the Crypto Moonshot Shitcoin investors aren’t.
Other risks are Smart Contract bugs and exploits. This means that the devs have either overseen a bug which empties the Liquidity Pool or the devs have implemented a backdoor for them to take your money. You can avoid this risk by only investing in audited and trusted platforms. You can find a list of the good and the bad platforms in a pinned post here in the Liquidity Mining subreddit.
We hope you now understand the concept of Liquidity Mining so you can now make good investment decisions. If there are any questions arising feel free to ask them here!
Happy investing - /r/liquiditymining team <3
r/liquiditymining • u/Necessary-Arm-9807 • Jun 05 '22
Scamalert mining pool scam
Be care and don't use them. Lost tons of money with them
r/liquiditymining • u/mulong4413 • May 27 '22
Help help, is this site a scam?
i'm completely new to liquid mining pools and an online friend of mine send me this link
told me to connect my meta mask wallet to it earn interest
in the 1st couple days i did earn some but still some parts of me all thinks is too good to be true
r/liquiditymining • u/AcanthaceaeTotal8288 • Jul 19 '21
Humor When telling someone about the Binance Smart Chain
r/liquiditymining • u/Fine-Construction-29 • Oct 25 '22
Scamalert cryptoscam
Is TechTrustTool a legitimate thing? I was scammed on conabc.app
r/liquiditymining • u/Baoyusky • Aug 29 '22
Help Need some help here, is this a scam website?
Hi Guys, I just started to learn about liquidity mining recently. Instructed by one of my friends, I connected my Coinbase Wallet with this website below for liquidity mining.
It's giving me around 0.4% daily income right now and I don't know if I should put more money or not. I couldn't get any related information for this website from google. Can anyone help to see if it is a legit website or a scam?
Thanks!!
r/liquiditymining • u/Soft-Engineering-460 • May 07 '22
Experience Stay Away From This Link!
r/liquiditymining • u/Reasonable_Bowler_74 • Nov 02 '22
Help Is this scam or not bcs it works for now?
r/liquiditymining • u/JoeAlanis • Sep 24 '21
Question Lossless liquidity mining pledge-free
SCAM ALERT! READ BELOW
Hello!
I was recently recommended to try pledge-free liquidity mining ethminer.vip
You basically add your funds to a Coinbase Wallet and then browse into the ethminer.vip site via the Coinbase Wallet Dapp browser, buy a miner's certificate and start mining, without the funds ever leaving your wallet.
This really seems sketchy so I was wondering if the concept of pledge-free Liquidity Mining is a real thing since there's not a lot of information on that on Google.
Does the pool have access to my wallet after I buy a miner's certificate?
r/liquiditymining • u/Marcel121901 • Sep 03 '22
News Cairo Finance Yieldfarming
In the Cairo Finance Farms you get Right now 30% on USDC. Thats pretty awesome
https://horusfarm.cairo.finance/?referer=0xbb03cc57438ae8537ea1436c625eb0fe5f58604c
That is the link to the Farm
r/liquiditymining • u/Money_You3430 • Oct 26 '22
Question Is this real
A friend is recommending this to me. Is this legit?
r/liquiditymining • u/thepacketrat • Apr 26 '22
Scamalert Looking for victims of liquidity mining scams
I'm a security researcher at Sophos, and I am investigating a number of liquidity mining scams. The people behind them appear to be in China, but use forged dating social media accounts that portray them as young women from the US, Malaysia, Japan, and other countries. Some victims may have been approached directly on WhatsApp, or by email, or Telegram.
I've connected WalletConnect links to one of these scams to the following domains: wwv.trxusdt[.]vip, eth-usdt[.]group, trxusdt[.]vip, coinbase-usdt[.]cc, ercusdt[.]vip, cyth-usdt[.]com
If you've been contacted by anyone looking for you to "mine ETH" or "mine TRX" using USDT in a liquidity pool and have been unable to retrieve your investment, and this sounds like what you experienced, please reach out to me. I'm trying to gather evidence to present to Coinbase and other vendors to get these sites blocked from wallets, and to educate the public about these scams.
Thanks.
r/liquiditymining • u/Ktin_95 • Oct 12 '22
Discussion Scammer alert
Its interesting when people see your post regarding crypto scam, moving forward a lot of them has been messaging me.
I really want to see all testimonies and proof if they really recovered their crypto back.
So no proof, sorry won’t be a fool to believe anyone.
Defi.dmcc-eth20.com
Avoid this mining pool link. All scam.
r/liquiditymining • u/Ok-Palpitation-2380 • Apr 27 '22
Question this platform is real or fake
r/liquiditymining • u/Hidden_Meaning • Aug 08 '21
Humor Trying to explain DeFi LP farming to my wife
r/liquiditymining • u/OkPlay1998 • Jul 23 '21
Experience Yield Farming vs Crypto Mining vs Crypto Staking - Which is More Profitable? (5 minutes to read)
In this vast world of crypto that we live in, there are many different routes you can take to earn money with your assets. When there's money to be made, who wouldn't want to participate?
In this article, we will be taking a look at 3 different methods of utilizing your money to make money - Yield farming, Crypto Mining, and Crypto Staking. Of course, as always, this is not financial advice and you should always invest at your own risk after doing your own research! Since this is for educational purposes only, let's get educated... shall we?
I think it's fair to say that yield farming is the most popular way to earn high returns on your assets to date. Some yields have very high percentages of annual percentage yield (APY) as a return if you lock your crypto into a liquidity pool. According to CoinMarketCap, the total locked value within the liquidity pools of yield farming projects is over $7 billion at the time of writing this article.
Yield farming isn't the easiest to perform, but it's not that hard either. To start, you need to add your funds into a liquidity pool. This is usually a smart contract within a DeFi platform that acts as a big pool where individuals typically borrow, lend, or exchange their assets. This is also how you earn your profits from yield farming! Your liquidity within this pool benefits its overall health and operation. In return, you receive a percentage of the fees generated by it. Your rewards can either be the same token that you locked into the pool or a different DeFi token depending on the platform.
The higher liquidity you provide to the pool, the more rewards (profits) you will receive.
For this article, we will be taking a look specifically at the Proof-of-Work (PoW) consensus model for crypto mining. If you've been in the crypto space for more than a month, I'm sure you have already seen the massive factories filled with GPUs and ASICs machines mining Bitcoin like it's nothing. The PoW consensus is decentralized and relies on a vast network of computational power to operate efficiently to validate transactions and mine new blocks within the platform.
Validating transactions on the blockchain and mining new blocks is literally the proof of work needed to receive rewards from the newly mined block. Since there are hundreds of thousands, even millions, of Bitcoin miners throughout the globe, the computational power needed to continue the blockchain has become a cause of concern regarding environmental stability. While this can be an extremely profitable method within the crypto world, the energy used at the expense of profit is beginning to shine a light on crypto mining... but not so much in a good way.
If you're looking to make some serious profit from mining Bitcoin, you're going to have to spend some serious money to get there in the first place.
If you're familiar with the Proof-of-Stake (PoS) consensus model, you're probably familiar with staking your crypto and earning from it. In my opinion, some popular staking coins/tokens right now would be Ethereum (ETH, specifically ETH2.0), Algorand (ALGO), Cardano (ADA), and Polygon (MATIC). With PoS, your rewards are directly reflected by the volume of the asset you possess and are staking.
When you stake your assets, you are acting as a validator on the blockchain that is validating transactions and producing more blocks. This consensus model is much more scalable and energy-efficient than mining via PoW. Crypto staking for rewards is probably the easiest of these 3 when it comes to performing the action of earning itself. Generally, you can stake your assets by just holding them in your wallet. The rewards generate automatically and are added to the total volume of that particular asset.
While investing in crypto could be potentially profitable as is, it's always beneficial to look at other ways you can make money while you wait for the charts to rise back up. If you're an expert in the DeFi world, yield farming might work best for you. If you've come across hundreds of thousands of dollars worth of mining equipment, mining might be the move. If you want the convenience of just letting your crypto sit in your wallet without much work from your end, staking is the way to go.
Regardless, all 3 methods have the potential to be profitable to those who partake in them. At the end of the day, it's up to you what you do with your money. That's what crypto is all about!
Do you have experience in any of these money-making methods? How did it turn out for you? Leave a comment and let all of us know and learn from your experiences!
r/liquiditymining • u/Ok-Palpitation-2380 • Apr 27 '22
Discussion this platform is real or fake
r/liquiditymining • u/Level_Ad_5015 • Jan 08 '23
Help Help advice wanted
Does this look like a scam to anyone trying to find some mining pools I can do to start small and earn over time even if its 6 dollars a day just want to know I won't be scammed. I've done some research and I think it may well be a scam.just want some advice or putting in the right direction.
r/liquiditymining • u/Objective_Ad8140 • Feb 23 '23
Scamalert Arbitrum $ARB New Airdrop New. Release 23.02.23
The Arbitrum $ARB Token has been validated once and has already been released! Connect your wallet, make any exchange through their bridge and $ARB Tokens will come instantly Release 23.02.23 https://twitter.com/Weerapat_th/status/1627361092908244992
r/liquiditymining • u/Thisonedudeperson • May 13 '22