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Bitshares Blockchain Decentralized Liquidity Pools Explained

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Feature Explorer / DeFi / Tech Deep Dives

Bitshares Blockchain Decentralized Liquidity Pools Explained

BitShares

By BitShares

Created 2 months ago, last updated 2 months ago
3 mins read
Bitshares Blockchain Decentralized Liquidity Pools Explained

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.

Want to read more into the technical side of Bitshares liquidity pools? Check out the Liquidity Pool documentation

Where to find liquidity pools

You can find liquidity pools on the Blocksights Bitshares blockchain explorer. This page is helpful to find the largest and potentially the most lucrative liquidity pools to participate in.
You can search for liquidity pools within the BitShares Reference Wallet.

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.

The only thing about searching for liquidity pools within the web-based wallet is that you need to know what assets need liquidity to proceed, that's why utilizing the Blocksights pool explorer can benefit your search for liquidity pools on the Bitshares DEX.

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.

Alternatively:

  • The open-source PoolTool Bitshares liquidity pool tool
  • Via Beet JS/QR/TOTP scripts

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.

So, are you interested in decentralized liquidity pools?

Are you already using them for your preferred Bitshares DEX market trading pairs?

Comment below with your experiences!

Also see:

https://github.com/bitshares/bitshares-core/releases/tag/5.0.0 (relevant release notes for inclusion of liquidity pools)

For More Information

Official GitHub Website: https://bitshares.github.io
Official GitHub Repositories: https://github.com/bitshares
Official Telegram Group: https://t.me/BitSharesGroup
Official Development Telegram Group: https://t.me/BitSharesDEV
BitShares Reference Wallet: https://bts.exchange

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