Mindblown: a blog about philosophy.
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Automated Market Makers (AMM) Examples
The AMM model is the default for decentralised exchanges but given the composability of DEFI different applications have emerged. Uniswap Uniswap uses AMMs to incentivise liquidity provision of pairs of Ethereum-based tokens (generally in a 50/50 ratio) which enable other users to swap those tokens for a fee without an intermediary, custody of funds or…
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What is Market Making in Crypto?
A centralised cryptocurrency exchange will try and create efficient markets for coins and tokens by acquiring customers to generate liquidity. They might do this through a mixture of marketing and product features: Offering the widest range of tradeable pairs Competitive fees charged per transaction Promoting its credibility & regulated status Making depositing/withdrawing fiat (on-off ramps)…
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Automated Markets and Traditional Markets
Any exchange, whether trading crypto, commodities or stocks, is designed to match the demand from traders wanting to buy an asset at a specific price with someone willing to sell at that price, and to automate the process within a user-friendly interface such as a website or App. The traditional model for doing this is…
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AMM : Automated Market Makers and How They Work
An automated market maker, otherwise known as an AMM, is a means of offering cryptocurrency trading without the need for an intermediary. AMMs combine Smart Contracts and incentives for liquidity provision to automate cryptocurrency trading and disrupt the traditional centralised exchange model, replacing it with the DEX. A DEX is an abbreviation for Decentralised Exchange.…
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Centralisation
The other issue with using wrapped tokens is that it required a higher degree of centralisation. As explained earlier, to wrap a token, you must lock your actual crypto asset with a custodian, who mints and burns the wrapped tokens. This requires you to trust the intermediary to perform this wrapping for you – not…
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Risks to consider when using wrapped crypto tokens
There are at least two major risks to consider when deciding if wrapped cryptocurrencies are right for you. The first, and perhaps more relevant to most people, is the security of your wrapped tokens. Security : When it comes to the security of individual blockchain networks, there can be arguments from many people about which…
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What wrapped tokens can I find out there?
Just as Bitcoin is probably the most popular cryptocurrency around, the most popular wrapped token is also based around Bitcoin. Wrapped bitcoin (wBTC), as of July 2022, is the biggest wrapped token in terms of market capitalization (over $5.6 billion according to CoinMarketCap). It commands roughly 80% of the maret share of wrapped tokens. The…
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Why people wrap crypto and how this is critical to digital asset markets
But why go through all the hassle of wrapping up a crypto? Why not just use the crypto directly? To understand how wrapped tokens work and why people go through the process of creating wrapped crypto, we have to understand that blockchain applications and cryptocurrency systems like Bitcoin and Ethereum are actually completely separate communication…
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Wrapped crypto tokens are
If you’re an avid trader, or trade on decentralised exchanges (DEXs) a lot, then you might have come across certain types of tokens or cryptocurrency that look familiar, and yet are very different from the crypto it appears to be named as. For example, you might find tokens with the “w” prefix like wBTC or…
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What Are Wrapped Crypto Tokens?
Wrapped cryptocurrencies refer to a type of cryptocurrency or token that represents another existing crypto, just on a different blockchain or network from where they originated. In this way, it is possible to use Bitcoin on the Ethereum network, for example, by “wrapping” up the original Bitcoin, and then using the resulting “wrapped Bitcoin” on…
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