Get to know Liquidity Pools at Chainge Finance

One of the services provided by Chainge Dex is liquidty pools, so what are liquidity pools? More will be discussed in the following article.

What are Liquidity Pools in Chaine Finance?

At Decentralized Finance (DeFi), liquidity pools are pools of tokens locked into smart contracts that facilitate efficient asset trading while enabling investors to earn returns on their holdings.

Liquidity pools are nothing more than automated market makers that provide liquidity to avoid large price swings for an asset.

How Liquidity Pools work

Whoever provides liquidity in the pool is actually adding funds to the smart contract, offering potential users the opportunity to buy and sell.

In exchange for providing liquidity, users aka liquidity providers (LP) will earn trading fees from trades that occur in their pool, in proportion to their share of the total liquidity.

As an example, let’s take a pair of tokens: token A and token B. The user must put token A and token B in the pool at the same time at a certain ratio.

When a user buys token B with his token A in DEX, he sends token A to the pool and gets token B from the pool, this means the ratio changes.

When a user exchanges his token B for token A on the DEX, he sends token B to the pool and gets token A from the pool. Thus the ratio changes in the opposite direction.

Interesting Things in Liquidity Pools

Now there is an interesting thing in Liquidity Pools, because the ratio is constantly changing, when the price of token A or token B changes significantly over a certain period of time, the liquidity pool continues to receive one token whose price remains the same or goes down while providing another token whose price goes up.

For a liquidity provider, this means he will lose a number of tokens whose value increases. That’s what we call impermanent loss. But when the price drops later, the non-permanent loss will be compensated.

So, for those of you who have noticed any of the declines (or increases) in the amount of currency collected. This is completely normal and part of how liquidity pools work.

However, in the Chainge application there are several pairs with sufficient liquidity so that such losses do not occur.

Chainge through its official release through the medium platform, recommends choosing this asset because it does not have any permanent losses and the APY is quite large.

  • USDT/TF-USDT – Pool size: 20.23 million – APY:161%
  • BTC/TF-BTC – Pool size: 11.8 million – APY:162%
  • CHNG/USDT — Pool size: 1.41 million — APY:438%, the pair has impermanent losses even though the APY offered is so high that it can cover any losses.

But keep in mind this APY will vary in time depending on the base price of the CHNG token and the amount of liquidity added in the pool according to a predetermined formula and will be updated over time.

High APY in Chainge

The APY that Chainge offers is quite large, this raises the question from where did the platform get that much funding? let’s discuss.

First of all, the fact that all distributed APY is in CHNG tokens (which are native tokens) makes things a lot easier for them as it depends on the price of CHNG, secondly, there is arbitrage.

APY Futures Offers on Chainge Finance

As for the APY offered for Futures Chainge, this is how it is:

The time frame for getting APY shown is for additional TF (Time Frame) assets received.

If you time the asset, the user will immediately receive the TF (Time Frame) asset with a larger amount and this is the interest. For certain assets, Chainge also values ​​CHNG, which is not included in APY)

Thus the user can see the Futures market as an interest market. Those who use spot assets to buy TF assets essentially mean they are lending. Those who sell TF assets essentially get back the funds they lent.

“We play as a counter party when the user lends. And we got the right to immediately liquidate our TF assets so we can arbitrate in the futures market,” Chainge wrote in his information via Medium.

So basically, “time frame to earn” feature + DEX futures market = decentralized lending system. The real interest is not given by us but the users selling the TF assets.

Funds are guaranteed because it doesn’t matter whether spot or TF their assets are always at the user’s own address. With DCRM technology ensures that cross-chain operations are secure. Chainge has been working on this technology for the last 5 years.

However, users can use their TF assets to be liquidated at any time, or wait for them to mature. When TF assets mature, they automatically switch to spot. The only difference between spot and futures (TF assets) is their starting time.

If the start time of an asset is 2022.1.1, and today is 2022.8.12, then the asset is futures. But when time passes, let’s say today is 2022.1.2, and the asset’s start time is 2022.1.1, then it is spot.

And speaking of APY, you can find a complete list of pairs on offer here

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