Binance Liquid Swap is a section of the Binance cryptocurrency exchange, which is an asset exchange based on AMM (Automatic Market Maker). Platform users can deposit funds into a liquidity pool and then receive income from each operation performed in this pool. The editorial staff of Profinvestment.com spoke about the functionality and features of the site and provided instructions for using Liquid Swap.
Binance Liquid Swap is a complex of liquidity pools, each containing two assets, digital or fiat money. Their relationship between each other forms the price indicator.
A user can become a liquidity provider by depositing assets into a particular pool and then receive transaction fees in that pool + flexible interest rate.
You can also quickly exchange one currency for another using pools, if the pool has enough liquidity for this pair. At the same time, commissions are extremely low, which gives an additional advantage over regular trading. Liquid swaps are especially good for stablecoin transactions as well as for large-size transactions.
Investments in this instrument imply two types of products: Stable Investment (includes stablecoins) and Innovative Investment (all other currencies and cryptocurrencies). The second option is more risky.
Working with Liquid Swap is very simple and not difficult even for beginners. We will tell you about how to exchange tokens and make money on the supply of liquidity through this service.
Binance Liquid Swap also provides an API, you can find information here.
|Platform name||Binance Liquid Swap|
|Launch date||September 2020|
|Exchange type||Centralized (operated by Binance)|
|Markets||Spot AMM trading|
|Working with fiat money||Yes|
|Cryptocurrencies||BTC, ETH, USDT and 15 more|
|Fiat currencies||EUR, GBP and AUD|
Supported currencies for exchange
From time to time, the selection of coins available in Liquid Swap for trading and earning is expanding. For May 2021, the system provides the opportunity to exchange the following coins:
- Cryptocurrencies / stablecoins: BTC, WBTC, BUSD, USDT, DAI, USDC, BNB, CTSI, INJ, COS, ETH, CHR, DOT, LINK, COMP, UNI, BETH, SUSHI.
- Fiat money: EUR, GBP, AUD.
One of the advantages of Binance Liquid Swap over other automated market-making protocols is that absolutely any asset can be exchanged here from a technical point of view – no matter what blockchain they are located on.
Binance Liquid Swap Guide
The Liquid Swap section includes tabs:
- Pool – information about all available pools is collected here, you can proceed to adding assets, buying them out or exchanging them.
- Liquidity is a tool for adding or removing liquidity.
- Exchange is a quick exchange of assets within one of the pools.
- My Share – Information about the liquidity contributed, the cost of the shares, and the rewards earned.
- History of exchanges made through Liquid Swap
Let’s figure out how to work with the platform, namely, trade and make money on it. You can also click the “Guide” button on the Binance website to view the video instructions (it is in English, but everything is very clear from the visual row and there are subtitles in Russian).
How to add liquidity to Binance Liquid Swap and make money on it?
Providing liquidity to a pool can generate income, as based on the deposited tokens, the user receives a portion of the commissions from all transactions in the pool and flexible savings interest (if there is a corresponding tool in the Binance Earn section). However, when the price of the token fluctuates greatly, the expected profit may not be achieved, so the operation carries a risk – there is no guarantee of return on investment.
You will need to take a test before adding liquidity for the first time. It includes ten questions related to working with Liquid Swap, adding and redeeming tokens, transaction fees.
Go to the “Liquidity” tab and select the required pool to which you want to add assets. You can also find this pool in the Pools tab and click the Add button.
Enter the data: what asset you want to add, in what quantity. Check out the information about the currency price, your potential share in the pool, the total pool size at the moment, and also about the possible profitability. Accept the Binance Liquid Swap Terms of Service and click the Add button.
If you add only one asset, then the transaction fee is also charged. The fact is that the addition of one coin will entail the exchange of half the value of the share for another coin, and only after that both coins will be added to the pool. The commission will negatively affect the profitability of the share, so it is better to deposit two assets at once.
Click on the “My Share” tab to find out information about your share in a particular pool, as well as the earned profit. At any time, you can add more liquidity, withdraw your funds, or withdraw only rewards.
The total return is calculated as follows:
- Total Return = (Current Interest Allocated Last Day + Trading Fees For Last Day) / Total Asset Value In The Pool As Of The End Of Yesterday (23:59:59 UTC) * 365
- Interest rate of return = current interest paid on the previous day / total value of assets in the pool at the end of last day * 365
- Trading Fee Rate of Return = All trading fees paid yesterday / total pool value at the end of yesterday * 365
Liquid Swap is not a guaranteed investment. Potential losses can be caused by fluctuations in token prices, excessive slippage when adding or redeeming large amounts of a single token, and frequent addition / redemption.
How to withdraw liquidity from Liquid Swap?
Click “Delete” in the “My Share” section for the desired pool. Alternatively, in the Pools section, click the “Redeem” button.
In the window that opens, specify which assets you want to withdraw and in what quantity. As in the case of the addition, when one token is removed, a transaction fee is charged, which is deducted from the volume of the removed tokens due to the need to exchange part of the volume of tokens for another asset.
Click the Delete button.
How to trade with Liquid Swap?
Go to the Swap tab under the Binance Liquid Swap section.
Select the assets you are going to give and receive. The choice of assets is limited by the pools available. Select the first currency to see what it can be exchanged for. Then enter the quantity and click “Exchange”.
By clicking on the gear in the corner, you can adjust the allowable slippage. The exchange will take place only if the slippage is within the specified range. The system will also issue a warning if, when adding a large amount of one token to the pool, there is a significant price bias.
Advantages and disadvantages
✅ Fast and cheap exchange.
✅ The possibility of passive earnings.
✅ Cryptocurrencies from different blockchains are supported, as well as fiat money.
✅ No verification required.
✅ Convenient interface.
✅ You don’t need to create a separate account or connect through an external wallet, just have a Binance account.
❌ Centralized control.
❌ The number of assets is limited.
Back in 2019, at the launch stage of Binance DEX, it became clear that platform developers were striving to provide modern tools for flexible asset management. Binance Liquid Swap is another proof of this fact. The service allows you to use the convenient functionality of liquidity pools within a familiar exchange. No exchange in the DeFi market will offer the ability to work with fiat money like Liquid Swap does. From an investor’s point of view, this is a great opportunity to earn passive income, not only from transaction fees in the pool, but also a flexible fixed rate per deposit (for some assets).