Providing liquidity for crypto assets is a golden opportunity for everyone, the potential is unmatched by the traditional financial system. The concept of liquidity providing as a means of building generational wealth through the cryptocurrency market may be foreign to some but could be the most significant product of DeFi especially for newcomers to the industry.
Traditional finance has done the work of creating financial products that people can use and understand such as mutual funds and GIC’s. The role of Decentralized Finance is to create and build on opportunities left unchartered. While many of these products are still held by retail investors around the globe, new options are emerging within the DeFi space that can offer incredible opportunities that traditional options cannot keep up with.
The Recent Past of Blockchain
It wasn’t long ago that blockchain began gaining popularity as the newest form of technology. At that time it held great promise for changing the world in an impactful way. It captivated the attention of millions with the promise of immutable, secure and completely transparent record keeping. One that in the face of a decimated economy after the financial crisis of 2008 was a potential light at the end of the tunnel. The foundation philosophy behind blockchain and cryptocurrency was the culmination of what many thought the existing financial world should be like, which is most likely the reason why it resonated with so many.
Many economists cite the 2008 financial crisis as the worst economic failure since The Great Depression. People were frustrated with the current financial systems and corruption within. The world saw movements like Occupy Wall Street as well as numerous investigations into some of the world’s largest banks and financial institutions hoping to address the numerous parties involved in a move towards a more trustworthy financial system.
Fueled by this frustration and the desire for truth, blockchain and cryptocurrency started to be sought out as a more viable option, along with a new conceptual methodology on how money could operate in the world. Recognizing that the digital age was progressing solutions began emerging that would utilize the latest concepts focused on using currency through purely digital means with no middlemen.
Liquidity Providing Emerges
Fast forward over a decade since the financial crisis and we now have a highly diverse decentralized financial landscape with its very own history and rapid growth. The past decade has seen all manner of things both good and bad. From the biggest hacks and celebrity-endorsed crypto scams to monumental cryptocurrency charitable donations and cryptocurrency all-time highs. We’ve seen bear markets, bull markets and everything in between.
Amongst the flurry of activity and progress DeFi is becoming better with age. Better technological solutions are emerging and the advent of XCMP (cross-chain message passing) allowing previously isolated blockchains the ability to share data with one another. This capability may prove to have a lasting impact on DeFi similar to what the internet did for personal computing.
This exciting time brings opportunities never thought possible before, one such opportunity, especially for retail individuals is liquidity providing.
What is a Liquidity Provider?
In the most simple explanation a liquidity provider is someone who adds their liquidity to the market as a vehicle to earn rewards for doing so. Depending on the avenue by which an individual provides liquidity to the market they earn different rewards. This can be compared to the bank a person decides to invest with, each promising different interest rates, perks, fees, etc.
Providing Liquidity on Sigmadex
Sigmadex is being built specifically for liquidity providers with a focus on educating and lowering the barrier to entry for newcomers. We achieve this by lowering the overall risk and maximizing rewards all while providing the utmost security. Staking liquidity on Sigmadex comes with incentives traditional protocols haven't yet to explore such as dynamic interest rates, penalty pool rewards, re-staking interest multipliers and asset appreciation.
In addition to these incentives, Sigmadex is also built to include impermanent loss prevention that dynamically adjusts the protocol to better handle future volatility expectations. This keeps liquidity pools well balanced and initial liquidity injections safer from unexpected losses due to price fluctuations.
Cryptocurrency is famous for its volatility and appreciation turning a small amount of capital into massive wealth over a short period of time. While the opposite can also take place efforts can still be made to minimize the effects of assets changing in value over time by using Sigmadex.
Having a small amount of exposure in cryptocurrency is healthy and even more healthy on Sigmadex as incentives are aligned for all protocol users.
A Long-Term Opportunity
With restaking incentives in place that provide an on-going reason to HODL, providing liquidity long-term not only benefits the provider but also contributes positively to the crypto ecosystem. One of the key aspects of the Sigmadex protocol is to eliminate market manipulation through the rapid adding and removing of liquidity, meaning long-term liquidity providing serves multiple benefits. A user can decide to provide liquidity for any pair they wish to choose from unlike traditional financial institutions. Each asset has the potential to appreciate in value over time adding to the numerous DeFi incentives already in place on Sigmadex. With many retail individuals looking for safe, long-term options to park their capital the numerous incentives earned through long-term liquidity providing on Sigmadex offers an opportunity like no other.