What is the liquidity pool for coins and tokens? Why is it important? What will happen to coins that have liquid problems? How should you look at the liquid issue when investing in a coin?
There are basically two types of exchanges in the cryptocurrencies market. The first is Central Exchanges (CEX) and the second is Decentralized Exchanges (DEX).
Projects using IDO presales are listed first in the DEXs(PAncakeswap, UniSwap, etc).
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DEX volumes now compete with the volumes of centralized exchanges. As of December 2020, the locked-in volume on DeFi protocols reached almost $ 15 billion.
DEX exchanges are also called AMM.
Popular exchanges using liquidity pools on Ethereum include UniSwap, SushiSwap, Curve, and Balancer. Liquidity pools on these platforms include ERC-20 tokens.
Similar exchanges on Binance Smart Chain (BSC) are PancakeSwap, BakerySwap and BurgerSwap. BEP-20 tokens are used on these platforms.
What is Liquidity pool?
The liquidity pool is funds locked into a smart contract. When the new coin is listed on a DEX (eg pancakeswap), a certain amount of coins and in return BNB / ETH must be added to the pool in order to be traded. Thus, once listed, the New Coin can be traded on DEX.
The biggest problem of newborn tokens / coins is the liquid issue. When we look at the past, we see that many coins died after a short time due to lack of liquid.
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Cryptocurrencies are encountering a rising interest all over the world. It recently exceeded $ 2 trillion in volume. In such a growing market, new players continue to enter rapidly.
Although there are different platforms for presale, DxSale is preferred more because it is the platform that gives the most trust to investors. Here, small-scale projects, as well as large projects, are making presale.
What should liquidity rate be?
Liquidity pool management is very important, especially in small-scale projects. Since small amounts can be collected for small projects, it is beneficial for them to increase this rate even more in terms of liquidity.
In addition, the liquid-locking period should not be less than 6 months. I especially recommend you to stay away from projects that take 1-3 months, because the lock is removed at the end of this period, so the developer can use the amounts he adds to the liquid pool as he wishes.
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Also, calculate how much of the amount collected in the presale goes to the liquid pool. Then calculate the amount of team tokens. Make sure that most team tokens are locked. Otherwise, when some of the team tokens are sold, the liquid pool may melt.