Binance, leading cryptocurrencies exchange ecosystem, has added a new community-driven mechanism of instant cross-currency transfers, Binance Liquid Swap. It will utilize liquidity provided by Binance's clients and an automated market-making engine.
Binance Liquid Swap: instant liquidity, low fees
With the new feature, assets will be exchanged through a "liquidity pool." All money in this pool will be "frozen" for pre-determined periods of time by Binance users. The price of cryptocurrencies, therefore, will be correlated with the amount of liquidity included in the pool.
Introducing #Binance Liquid Swap!— Binance (@binance) September 4, 2020
Instant liquidity via Automated Market Maker with 0.04% transaction fees for the first month.
Binance Liquid Swap advantages:
🔸Competitive fees$BUSD, $DAI, and $USDT pairs are available in the Swap Pool now!
To celebrate the introduction of the new mechanism, Binance (BNB) introduces negligible trading fees of 0.04% for the first few months of Liquid Swap operations. Once the promotional period ends, fees will return to the 0.1% ratio. The inaugural suite of assets will include BUSD, DAI and USDT with BUSD/USDT, BUSD/DAI and USDT/DAI swap pairs available from launch.
According to the introductory blog post, the new mechanism will provide Binancians with an improved trading experience. Swaps will be finalized instantly with better pricing.
Even with large transactions, slippage will be reduced significantly, so, crypto prices within the pool will be much more stable than on regular exchanges.
Stablecoin holders can benefit as liquidity providers
Since users' money will be the only source of liquidity for the new protocol, the protocol will reward all liquidity providers with the share of fees collected. Thus, users can enjoy profits on their deposits.
Profit will be calculated through a sophisticated Automated Market Maker (AMM) formula. Binance issues a warning that this opportunity should not be treated as risk free, and losses may occur in the event that liquidity drops and prices rapidly fluctuate. Also, users who deposit and withdraw liquidity will be charged additional fees.
As CryptoComes previously reported, Binance has added numerous DeFi tokens to its spot trading pairs suite. Some red-hot assets, e.g., Yearn.Finance (YFI) and Polkadot New (DOT), are also available in the leveraged section.