RE: An interesting income source on Hive – Providing Liquidity

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RE: An interesting income source on Hive – Providing Liquidity

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incublus in #tribes • 10 days ago

This is a really interesting topic for me, thanks for writing about it, man, and I don't really understand it. I've only contributed to the liquidity pool for zingtoken once and I don't know if I made a profit from it because the price of Zing has dropped a lot recently. I don't know how much people remember, but there was a time when 1 Zing was worth 0.50 Hive, and now a Zing is worth 0.0029 Hive, so that's about 340 Zings for 1 Hive. Anyway, I guess one learns things by trying things lol.

10 days ago in #tribes by incublus

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achim03 9 days ago

Providing liquidity comes with a certain risk because of the thing called impermanent loss. It's quite tricky to explain this. In a nutshell, if you have two tokens in a liquidity pool, you will always own 50% of value in token A and 50% of value in token B. If in your case Zing goes down in price, you will own much more Zing tokens and less hive tokens. In my opinion, it's always important to chose a pool with tokens that evolve in a similar manner or that you don't care ending up with either or. For example if you provide liquidity in the pool hive:btc, you probably don't mind ending up with more hive or more btc. I would only provide liquidity for such pools.

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incublus 9 days ago

That makes a lot of sense man, that's the way I'm going to go from now on. Like you said, having more Hive or BTC is not a problem.

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