In its simplest form Value Liquid is a cryptocurrency exchange, just like Coinbase and Binance, it lets you buy (but we call it swap) cryptocurrencies.
But Liquid has other unique features, lets delve in a little bit.
Liquid is a decentralised exchange (DEX)
You’ve probably heard of the big corporate exchanges like Binance and Coinbase, with these exchanges you can use your fiat currency, like USD or Euro to buy cryptocurrency. These are centralised exchanges (CEX).
These centralised exchanges (CEX) buy up a ton of whatever currency they want to offer and then offer it to their users to buy, often at inflated prices. They also hold and look after your currency for you.
A decentralised exchange(DEX) like Liquid (Or Uniswap) also allows you to buy cryptocurrencies (we call it swap) but instead of using fiat such as USD, you swap from one cryptocurrency to another. E.g. I can swap 1 Ethereum for 100 Value. (Now you see why we call it swap and not buy!)
To use decentralised exchanges you need to have a cryptocurrency wallet, like MetaMask. You send coins from Binance/Coinbase/Huobi to your wallet and then you can start doing lots more with your crypto. See how to get started with MetaMask.
You can provide liquidity on Liquid
Liquidity providers (LPs) are those users who provide tokens (liquidity) to an exchange. If I want to swap Ethereum for Dai for example someone has to make those tokens to the exchange so that others can swap them.
In order to provide liquidity there must first be a liquidity pool on the exchange. These pools are added by the developers.
A Value/DAI pool is available on Liquid for example, LP’s can add Value and DAI from their wallets. When a user comes onto the Liquid exchange these pools are used to provide the swap function for other users.
When a user swaps their token, there is a small charge, this will then go to the LP as a reward.
When you provide liquidity on a DEX you will get a Liquidity token in return, for Liquid these as called Value Liquidity Pool Tokens. (VLPs)
Sometimes providing liquidity can be risky, if one of your tokens goes down in value the difference will be taken from the other token. This is called impermanent loss. You should understand this risk before providing liquidity.
With your Value Liquidity Tokens, you can get rewards (Yield Farming)
Due to the risks involved it’s sometimes difficult to get LP’s for a certain pool, especially with new coins. So, often token providers will provide rewards as an incentive. This is where staking pools come in.
If you have provided liquidity for a token you will have received a liquidity token. You can stake these tokens and as a reward, you will be paid a bonus by the token provider. These rewards will often be shown as APY based on the token price at the time.
For example, if you have VLT’s for the VALUE/DAI pool you can then stake these tokens and get more Value in rewards. So you get a yield on your tokens by providing liquidity.
These staking rewards build up over time, the more VLPs you have the more rewards you will get.
Using this method means that new tokens can be distributed among any users that provide liquidity, and therefore increase the number of token holders and increases visibility for a project.
Liquid allows other tokens to create staking pools (FaaS)
Let’s say you’re a new project and you want to start distributing your tokens. To do so you need to first create your own Liquidity Pools. Then to distribute your tokens, you also need to create staking pools and offer X amount of token rewards over a certain period of time.
This is a lot of work just to distribute your tokens.
Liquid will do this process for you, it’s called Farming as a Service (Faas).
Initially, this process will be done on a partnership basis; you contact the Value DeFi team with your requirements. E.g. What type of pool you want to set up, what rewards you want to give out, and over what period of time.
The Value DeFi team will do this for you and at no charge.
When the final phase of liquid is released, an interface will be provided so the Value DeFi team does not have to be involved. New projects will be able to do this process themselves.
FaaS saves your users time and money
Every time you do a transaction on the Ethereum blockchain you need to pay a transaction fee, known as gas. So when you swap, provide liquidity or stake you have to pay gas.
Providing liquidity and then staking your rewards is usually a two-step process. You pay gas to provide liquidity (for which you receive LP tokens) and then you pay gas to stake your tokens. As there’s lots happening in the background these fees can be expensive.
With the Value Liquid technology, these two steps happen together, when you provide liquidity, your LP tokens will also be staked. You will therefore automatically receive rewards, it’s a one-step process.
FaaS was launched with Sentivate as the first partner, Sentivate and Value token holders can now add liquidity to these pools and receive rewards for doing so. All in a simple to use interface.
Why is Value Liquid good for Value token holders?
If you’re a Value token holder – here’s the good bit: every time someone uses the liquid exchange there is a small fee charged. The majority of this fee goes to the Liquidity Providers but a small percentage goes to our Governance Vault in the form of a buyback and distribution of the Value token.
If more pools are opened to provide liquidity, then more swap fees will go to the Governance vault. Stakers in the Gov vault, therefore, get more rewards! Value Liquid is just one part of the Value DeFi ecosystem that rewards Value Governance stakers.