Understanding Liquidity Pools
If you are new to BSC or DeFi, liquidity pools can be a complicated concept to understand. I will do my best to help you understand simply.
Liquidity pools are pools of tokens that sit in smart contracts. If you were to create a pool of DAI and BUSD where 1 DAI = 1 USDT, you would have the same amount of tokens, let’s say 1,000 tokens (1,000 DAI and 1,000 USDT) in the pool when you deposit.
If Trader A comes and exchanges 100 DAI for 100 USDT, you would then have 1,100 DAI and 900 USDT in the pool so the price would tilt slightly lower for USDT to encourage another trader to exchange USDT for DAI and average the pool back to the same 1:1 ratio.
You can see these details for each pool and it is something you can take advantage of when depositing.
%20(1).png?alt=media)
In Belt.fi, all tokens or LP tokens can be pooled. Pool consisting of groups of tokens/LPs with the same origin or same values support low transaction fees and low slippage through AMM. The best pools of our protocol will generate more yield and return more incentive to Belt.fi pool liquidity providers. Some of these of pools may consist of a variety of:
- Instant-swap protocol (like PancakeSwap) LP pools
- Vault with lending protocols (like venus) token pools
- Staking assets & assets (like ETH-BETH) pools
- tokens + pool tokens (like VAI - venus pool ) pools
- non-yield non-impermanent loss stable vault pools with AMM profits
This great variety of pool categories gives each user a plethora of options to choose from. AMM incentivation is not the only upside to select. Pools can be made of bTokens, incentivizing users to deposit into a single-sided vault and farm BELT tokens without soley relying on AMM fee returns.
We at Belt.fi strive to give the greatest possiblity to users. Not setting on a single strategy such as AMM or auto-compounding sets up a field with multiple strategies working in tandem for the biggest benefit as the BSC, HECO, Klaytn DeFi ecosystems continue to grow.