BigONE Liquidity Mining Is a Profitable Method That Disregards Risk
As a natural phenomenon, liquidity mining is not associated with mining. It is designed to provide better liquidity and transaction depth, increase the number of pending orders for buying and selling transactions, and make it easier for users to speculate and make changes to the low slippage to complete the transaction.
BigONE liquidity mining services were created to improve the liquidity of the BigONE cryptocurrency exchange, and also to meet the trading needs of buyers and sellers. Through the liquidity funding pool, liquidity providers can provide funds for the liquidity funding pool, and transaction fees paid by users during transactions can be used as transaction fee dividends for liquidity providers. Since liquidity providers receive transaction fee dividends in a similar way to mining, this method of earning profits is known as liquidity mining. Liquidity providers can repeatedly obtain transaction procedures by providing liquidity. Fee-sharing rewards are fundamentally different from the way that hash rate mining is used to exchange cryptocurrencies
Is liquidity mining profitable regardless of risk?
It is the fall in the price of cryptocurrencies that poses a risk to liquidity mining. Despite the liquidity provider gaining income from the fee-sharing, if the price of the cryptocurrency deposited during this period drops, the liquidity provider will still suffer loss. However, if you are a long-term holder of a certain cryptocurrency, then earning income through liquidity mining will be a good option.
Apart from the risks associated with the fall in currency prices, there is another risk that cannot be ignored, which is impermanent losses. Impermanence loss is an inevitable part of the liquidity mining process. When a user participates in a liquidity mining service, he or she must invest in two cryptocurrencies. Although users also redeem these two cryptocurrencies when redeeming them, the relative proportion and total value of redeemed cryptocurrencies will change based on the rise and fall of currency prices. In special circumstances such as skyrocketing, holding cryptocurrency directly will result in higher returns than investing crypto in the liquidity pool. This difference is called impermanence loss. Impermanence loss is usually unavoidable, but as the price of tokens gradually returns, this temporary loss of funds will be gradually wiped out. Furthermore, the longer the liquidity provider provides liquidity, with the accumulation of fees in the trading market, the overall income of the liquidity provider will usually exceed the temporary loss. Therefore, users who participate in liquidity mining can still obtain higher returns than holders of spots.
The profit potential of liquidity mining is high regardless of risk if you disregard the losses caused by currency price declines and impermanent losses as compared to holding cryptocurrencies for spot trading.
How can liquidity mining generate income?
When a liquidity provider deposits cryptocurrency into the liquidity funding pool and there is a transaction, BigONE will charge both parties of the transaction a fee, and at the same time will pay a certain percentage of the fee to users participating in the liquidity mining. The liquidity mining reward tokens will be distributed to users in real-time.
Is it worth investing in liquidity mining?
We mentioned in the previous article that if you are a long-term holder of a certain cryptocurrency, it is highly recommended that you utilize the liquidity mining services, which will allow you to hold cryptocurrencies and make a profit due to the rise in currency prices, gaining both incomes at the same time.