Can you please explain what is LP and how can i get profit in this system The Goddess
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Cryptomaniac
The beauty of DeFi is that when conducting a token swap on a decentralized crypto exchange (DEX), users never need a specific counterparty or intermediary. Automated systems called smart contracts manage things end-to-end.
DEXs rely on a special kind of system called automated market makers (AMMs) to facilitate trades in the absence of counterparties or intermediaries.
But what exactly are AMMs?
This article explains what automated market makers are, how they work, and why they are critical to the DeFi ecosystem.
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Cryptomaniac
Conversely, centralized exchanges (CEXs) use an order book to match a buyer with a seller to execute a cryptocurrency trade at a mutually agreed exchange price.
AMMs introduce two fundamental changes to crypto trading:
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Cryptomaniac
Traders don’t need to wait for a counterparty when using an AMM. Instead, they interact with smart contracts to buy, sell, or trade assets. These smart contracts use the asset liquidity contributed by liquidity providers to execute trades.
Algorithmically determined exchange prices
The supply-demand ratio of a cryptocurrency token pair determines their exchange rates. For example, if a token's liquidity supply exceeds demand in the liquidity pool, it will lead to a fall in its prices, and vice versa.
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AlbaGuBrath
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