Liquidity Swap is an automated market maker (AMM), which is the first AMM service to launch on а centralized exchange. The AMM allows users to swap crypto assets within a range of liquidity pools. The pricing model behind the AMM provides “more stable prices and lower fees” when compared to traditional order book trading, Binance notes.
In its current configuration, Binance Liquidity Swap enables liquidity providers to use three trading pairs - USDT/BUSD, BUSD/DAI, and USDT/DAI. The pricing model behind the automated market maker is dependent on the number of assets in the liquidity pool.
“These prices and fees change when you swap, add, or remove funds in the pool. You can become a market maker by simply adding tokens to the pool. You’re entitled to your interest plus a cut of the transaction fees when you pool your tokens.”, Binance wrote in a blog post.
The earning model relies on a corresponding 7-day annual percentage yield (APY) with the profits being converted into the assets from the respective pool.
Binance’s CEO Chanpeng “CZ” Zhao emphasized that the goal of the new trading platform is to attract more participants and trading volumes.
“We hope to further the growth of the DeFi marketplace and empower our users with more earning power and easier liquidity through a centralized AMM pool with the credibility, safety and security provided by Binance,” Zhao stated.
Binance is a firm believer in the DeFi sector, as Liquidity Swap is the exchange’s second DeFi project for this week only. On September 1, Binance, dubbed as the largest crypto exchange to date, competed with Ethereum with the launch of Binance Smart Chain, which is a blockchain, compatible with both Ethereum smart contracts and the exchange’s native Binance Chain.
Binance further explained that the new blockchain is tailored for DeFi, with transaction fees as low as $0,01. The blockchain is also offering BNB staking rewards and can produce a new block in just 3 seconds.
Meanwhile, the leader in token swap protocols, Uniswap, made it to over $1,9 billion in liquidity, according to data from Uniswap’s dashboard.