What is Automated Market Making (AMM)?
Automated Market Making (AMM) is a decentralized trading protocol that enables users to trade cryptocurrencies without relying on traditional order books. Instead of matching buyers and sellers, AMMs use smart contracts and liquidity pools to facilitate trades. Users can contribute their assets to these liquidity pools, allowing others to trade against them. This model enhances market efficiency and reduces price volatility.
CoinEx offers a diverse array of Automated Market Maker (AMM) markets that enable liquidity providers to earn impressive returns. Among these, certain markets stand out due to their high Annual Percentage Yields (APY), making them particularly attractive for those looking to maximize their earnings. Below, we explore three top AMM markets on CoinEx with outstanding returns.
1. DUKO/USDT
- Total Liquidity: $31,945.04
- APY: 2311.87%
The DUKO/USDT pair leads the pack with an incredible APY of 2311.87%. With a total liquidity of $31,945.04, this market presents a highly lucrative opportunity for liquidity providers. The substantial return is a major draw for those looking to capitalize on the profits available in the AMM market.
Overview of DUKO
DUKO is supported by a rapidly expanding community and is part of a growing ecosystem within Solana. The project emphasizes fairness and inclusivity, allowing all community members to participate in decision-making processes. This decentralized approach enhances its appeal as a trading asset.
2.VITE/USDT
- Total Liquidity: $7,168.67
- APY: 1010.01%
Next up is the VITE/USDT market, which offers an impressive APY of 1010.01%. While the liquidity in this market is lower than DUKO/USDT, at $7,168.67, it still provides an excellent return for liquidity providers seeking solid profits with a more moderate investment.
Overview of VITE
VITE operates on a decentralized exchange model that returns fees directly to users rather than taking cuts for itself. This unique structure allows VITE holders to stake their assets and earn dividends, further enhancing its attractiveness as an investment option.
3.KEIRO/USDT
- Total Liquidity: $11,847.66
- APY: 903.64%
The KEIRO/USDT market rounds out the top three with a respectable APY of 903.64%. With total liquidity of $11,847.66, it provides a more stable option for users who want to participate in AMM markets without aiming for extremely high APYs but still seeking attractive returns.
Overview of KEIRO
KEIRO is gaining traction among traders due to its potential for steady growth and reliability in returns. As part of CoinEx's AMM offerings, it presents an opportunity for users who prefer lower volatility while still benefiting from passive income through liquidity provision.
These three markets DUKO/USDT, VITE/USDT, and KEIRO/USDT are some of the top-performing AMM markets on CoinEx, offering liquidity providers the potential to earn substantial returns. The APYs available in these markets highlight the opportunity to earn passive income by injecting liquidity into high-performing trading pairs. As always, it is important for users to carefully evaluate these opportunities and consider their risk tolerance before participating.
How CoinEx AMM Revolutionizes Liquidity
CoinEx takes AMM to the next level by seamlessly integrating it with the traditional order book model. Here's how it works:
Liquidity Provision: Users contribute pairs of cryptocurrencies to a liquidity pool (e.g., ETH/USDT). By doing so, they become Liquidity Providers (LPs).
Automatic Price Discovery: The AMM protocol automatically calculates buying and selling prices based on a mathematical formula, ensuring continuous and dynamic price discovery. CoinEx primarily uses the "Constant Product Market Maker" model, where the product of the two assets in the pool remains constant (X * Y = K).
Fee Distribution: As an LP, you'll earn a share of the trading fees generated in the pool. For every transaction, a percentage of the fees collected are distributed among LPs based on their share in the pool. CoinEx distributes 50% of the trading fees to liquidity providers. For instance, with CoinEx AMM offering a 3,093.07% APY on the BERA/USDT pair, liquidity providers can earn substantial returns from trading fees.
Advanced Algorithms: CoinEx employs two advanced algorithms to optimize AMM performance:
- Infinite Constant Product Market Maker: Used for non-stablecoin pairs (e.g., CET/USDT), ensuring liquidity at all price levels.
- Finite Constant Product Market Maker: Used for stablecoin pairs (e.g., USDC/USDT), maximizing capital efficiency within a defined price range.
Key Benefits of CoinEx AMM: Accessibility, Passive Income, and Seamless Trading
CoinEx AMM offers several key benefits that make it an attractive platform for traders of all levels. First, it ensures accessibility for everyone, allowing anyone, regardless of their trading experience, to become a market maker. This opens up opportunities for those who might not have previously considered providing liquidity. By participating in the AMM, users can earn passive income by supplying liquidity and receiving a share of the trading fees generated within the market. The platform's integration of AMM with the order book streamlines the trading process, enabling users to earn fees without the need for constant active management of their positions. Additionally, CoinEx provides flexible fund management, allowing users to easily transfer assets between their Spot and AMM accounts with no fees or limitations. With hundreds of AMM-supported crypto markets available, users can diversify their investment strategies and take advantage of various opportunities across the platform.
Understanding Market Maker Benefits: AMM markets have a different fee structure where VIP benefits and CET deductions are unavailable7. Market makers, however, have special rates: Maker 0% and Taker 0.3% for normal AMM markets, and Maker 0% and Taker 0.1% for stablecoin AMM markets.
Example Calculation: CET/USDT Market
To illustrate how profits are calculated, let’s take the CET/USDT market as an example. Suppose this market generates 10,000 USDT in trading fees over one hour. If your liquidity contribution represents 1% of the total CET/USDT liquidity pool, your earnings would be calculated as follows:
- Earnings=Total Fees×Fee Distribution Rate×Your Liquidity Share
- Earnings=Total Fees×Fee Distribution Rate×Your Liquidity Share
So,
- Earnings in USDT=10,000×100%×1%=100 USDT
- Earnings in USDT=10,000×100%×1%=100 USDT
Additionally, since CET markets allow for a full 100% fee distribution, you would also earn:
- Earnings in CET=10,000×100%×1%=100 CET
- Earnings in CET=10,000×100%×1%=100 CET
Understanding the Risks: Impermanent Loss
Before participating in CoinEx AMM, it's crucial to understand the concept of "Impermanent Loss." This occurs when the price of the assets in the liquidity pool diverges significantly from their initial values. In such cases, LPs may experience a temporary loss of value compared to simply holding the assets.
How to Participate in CoinEx AMM
Getting started with CoinEx AMM is straightforward. Follow these step-by-step instructions:
- Create an Account: Sign up on the CoinEx platform if you haven't already.
- Deposit Assets: Transfer your desired cryptocurrencies into your CoinEx wallet.
- Select an AMM Market: Navigate to the AMM section and choose a trading pair that interests you.
- Add Liquidity: Deposit equal values of both cryptocurrencies into the selected liquidity pool.
- Monitor Your Earnings: Track your returns and adjust your strategy as needed.
Conclusion: Empowering Traders with AMM
CoinEx AMM is transforming the landscape of cryptocurrency trading by democratizing access to liquidity provision and offering users a new avenue for passive income. By understanding the mechanics of AMM and the associated risks, you can strategically participate in this innovative system and potentially unlock significant financial rewards.
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