Frequently Asked Questions

The term liquidity isn’t specific to crypto, but it’s an important concept in the crypto world. This post will provide insights into liquidity within centralized exchangesdecentralized exchanges.

A highly liquid asset is one that can be easily sold (liquidated) at its fair market value, whereas an illiquid asset is one that can’t be sold without significant effort, a loss of value, or both. Similarly, a highly liquid market for a particular asset is one with lots of (fair) buy and sell orders circulating.

What about the crypto world? The basic rule is the same: the liquidity of a given token is a function of the number of buy and sell orders on the books. As tokens are swapped as well as sold, we talk about the liquidity of trading pairs as well as individual tokens. Centralized exchanges (CEX), which maintain custody of their users’ tokens, record buy and sell orders in a digital order book and match the former to the latter. Like a brokerage, a CEX will generally charge a fee on each match. They often use fee scales to attract “market makers,” or large-volume traders who provide liquidity by putting orders in their books. Network effects also come into play here: an exchange with high liquidity will offer narrower bid-ask spreads, attracting more volume and further upping liquidity.

Historically, these factors have given CEXs a liquidity edge over decentralized exchanges or DEXs. CEXs, however, have a few drawbacks. First, they limit traders to token pairs defined from the top down. Second, some users would prefer to keep custody over their tokens throughout the trading process. Centralization also entails security risks: like a bank, a CEX is a big, fat prize for anyone clever enough to break in. Finally, while some CEXs pay interest on crypto held, the profit-making opportunities for everyday traders are limited. For traders who value autonomy and security or who want to put their assets to work, new technologies make DEXs increasingly attractive.

For the time being, as the trading volume of the top DEXs is still a fraction of that of the top CEXs, the latter still hold a liquidity advantage. However, the next generation of DEXs — led by pancakeswap — will flip the script through technologies like liquidity aggregation and cross-chain interoperability.

Smart liquidity routing, cross-chain interoperability, and a more scalable architecture will all be good for your wallet and the ecosystem alike, as they will help make trading across many exchanges more competitive and efficient. However, DiamonDefi will also offer three distinct swap reward pathways based on the tokenomics of the token. On pancakeswap itself, classic yield farming will incentivize users to provide liquidity in traditional way while market making rebates will provide extra incentives for large-volume traders. Joining the DiamonDefi will give users another way to earn rewards via rewards determined on a token bonding curve.

Tokens holders receive continuous earnings that evolve with market conditions based on:The interest rate payment on loans - depositors share the interests paid by borrowers corresponding to the average borrow rate times the utilisation rate. The higher the utilisation of a reserve the higher the yield for depositors. Each asset has its own market of supply and demand with its own APY (Annual Percentage Yield) which evolves with time. You can find the average annual rate over the past 30 days to evaluate the rate evolution, and you can also find more data on the reserve overview of each asset in the  section on the app.

You can deposit any amount you want, there is no minimum or maximum limit. Still, it's important to take into account that for really low amounts it is  possible that the transaction cost of the process is higher than the expected earnings. It is recommended that you consider this when depositing very low amounts.

Yield farming is the process of staking your cryptocurrencies to earn more of them as passive income. Essentially, you’re adding liquidity to a platform and earning rewards in the form of interest for doing so.The process is similar to holding traditional fiat in a savings account. Money held in a savings account is used in the bank’s general liquidity pool. Banks utilize that pool for lending and providing money to customers. Yield farming is the same idea, only you’re contributing to a lending platform rather than a bank.

any would argue farming cryptocurrency is very worth it, considering you’re earning interest on cryptocurrencies that were just sitting in your wallet in the first place.Depending on how much you lend, farm yield is especially worth it because you’re almost guaranteed profit. Farming isn’t nearly as risky as day trading, which could result in you losing all of your funds.

APY, or annual percentage yield, is an annualized method that predicts the amount of returns one could get over a year. The APY is the rate of return earned on an investment when you account for the effect of compounding interest, presuming the money remains deposited for one year. The formula for calculating APY is :
‍APY= (1 + r/n )n – 1
‍Where r = period rate, and n = number of compounding periods.

Staking consists of depositing your AAVE tokens within the protocol Safety Module. The purpose of staking is to act as a mitigation tool in case of a shortfall event. As an incentive for this service Safety Module stakers will receive Safety Incentives.