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The Collapse of the Crypto Lending Market: 3AC, Voyager, Celsius

The Collapse of the Crypto Lending Market: 3AC, Voyager, Celsius

John Martin 4 min read
Those people who have been closely following the crypto market for some time regularly see news about the collapse of a coin or token.  After the Terra Luna crash it became clear that many very large projects had big holes in them. While the whole crypto industry was doing well, they could promise their clients super profits and easily attract new capital, but now everything seems to have changed. During the crypto winter, the lending market is going through bad times. Several major players announced bankruptcies and restructurings one after another. Three Arrows Capital Three Arrows Capital is one of the most famous cryptocurrency hedge funds that has been investing in digital assets. Nevertheless, a large—scale drop in cryptocurrency prices dealt the company an irreparable blow - on June 29, 3AC was liquidated. 3AC has invested in various projects in the early stages of financing. Funds were usually collected in USDC/USDT. For their part, 3AC held a commitment of 8% per annum. It seemed to the projects to be a fairly safe action, simply because it is a large fund. But on June 27, Voyager Digital LLC notified 3AC of default after the fund failed to repay loan payments on time. Voyager provided 3AC with loans in the amount of 15.2 thousand BTC and 350 million USD. When it comes to such large funds, many people believe that since they are large and have been in the market for a long time, they are too big to fail. Many people thought that Terra was too good a project to get buried, and they also thought that funds like 3AC kept the situation under control, but they did not always make the right decisions. Following 3AC, the largest American crypto broker Voyager went bankrupt. They provided 3AC with loans in the amount of 15.2 thousand BTC and 350 million USD. A week after the collapse of 3AC, Voyager announced the suspension of trading, deposits, and withdrawals. Celsius Following Voyager and 3AC, on July 15, the Celsius crypto-lending platform declared bankruptcy. The New York company went bankrupt by the US insolvency law. The company's assets and liabilities are ranging from 1 to 10 billion US dollars. If in October 2021, according to CEO Alex Mashinsky, the company had $25 billion in assets under management, then in May, despite the collapse in cryptocurrency prices, there were about $11.8 billion in assets, according to the website, and another $8 billion were customer loans, which made the company is one of the world's largest crypto lenders. As of today, Celsius has $167 million of cash on hand, which, according to its CEO, will provide "sufficient liquidity" to support operations in the restructuring process. However, there is a "hole" in its balance sheet of about $1.2 billion. Some analysts compare the collapse of Celsius with the collapse of Lehman Brothers, only in the field of cryptocurrencies, implying a domino effect that began with the bankruptcy of a large bank on Wall Street, which eventually led to the mortgage debt crisis and the global financial crisis of 2008. Promises of great profitability of Celsius, which the company distributed to attract new customers, largely caused its final collapse. Regardless of whether the collapse of Celsius portends a larger-scale collapse of the entire cryptosystem, or not, the days when clients of such firms received double-digit annual revenues are numbered. But even 3 weeks after Celsius suspended any possibility of withdrawals by customers due to "extreme market conditions" and a few days before it eventually filed for bankruptcy protection, it was still advertising on its website an annual return of almost 19% that was being paid weekly. The company's bankruptcy filing shows that Celsius also has more than 100 thousand creditors. The firm said that most of the account transactions will be suspended until further notice and that there are currently no requests for permission for withdrawals by customers. At the same time, the accrual of remuneration is also suspended during the bankruptcy process, and currently, clients will not receive their remuneration. This means that customers trying to access their cryptocurrencies will not be able to do so yet. It is also unclear whether the bankruptcy procedure will eventually allow customers to recover losses. If there are any payments based on the results of, apparently, a multi-year process, then there is also the question of who will be first in line. Everything is complicated by the fact that in the absence of regulation in the crypto sphere and unlike the traditional banking system, where customer deposits are usually insured, there are simply no formal consumer protection measures to secure users' funds if something goes wrong. But even more important is what is written in the fine print in the terms and conditions of Celsius: the firm warns that in the event of bankruptcy, any permissible digital assets used for earnings or as collateral for loans cannot be returned and that customers will not have any legal remedies or rights in connection with the obligations of Celsius. It looks like an attempt to get absolute immunity from legal offenses if things go badly for the platform. We can say that by promising its customers high profitability, Celsius was able to get only a very small profit margin. As a result, Celsius did not have a buffer for a bad market situation. Possible bankruptcies of large crypto creditors may have a significant impact on crypto industry. If creditors will start going bankrupt, then this clearly does not bode well for investors. Plus, each such scandal is a "red rag" for regulators and leads to a tightening of the laws of different countries in the field of cryptocurrencies.
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What Is a DAO And How Does It Work?

What Is a DAO And How Does It Work?

Ruth Kise 10 min read
Until recently, the concept of blockchain was only known in the context of cryptocurrencies, but today this technology is actively used in business. What's more, the new acronym DAO is entering the mainstream. So the "untraditional" business model appears along with JSC and attracts the attention of business enthusiasts more and more. DAO Definition and Key Features DAO (decentralized autonomous organization) is a company that is based on blockchain technology, managed using smart contacts. It does not have owners in the traditional sense, as well as controlling and governing bodies like the board of directors. In other words, decentralized autonomous organizations lack a hierarchical structure, and all participants in the ecosystem have the same rights and can vote for changes in the protocol on an equal basis with other participants. strong >Main features of DAO: In contrast to JSC, the «command and control» structure in formal union of groups of people is not applicable in this case. There are no executive boards and the company is managed by the community by voting on any relevant matter relating to the activities of the organization; Instead of traditional hiring, a person receives a smart contract based on the project. After that, the members of the community discuss the offer and vote. After its adoption, the work of the executive begins directly; Quitting is also becoming a consensual issue. So, if a person does not cope with the tasks set for him, token owners who voted to hire him can withdraw their votes, leaving the employee "overboard." Thus, possible conflicts are excluded in the DAO due to lobbying for the interests of certain persons; Agility and flexibility to innovate. This is due to the fact that companies are organized not around people, but around values​ and smart contracts . In a peer-to-peer system, much faster. In a "flat" organization, the community can rally faster and "fund" the best and most promising idea. As noted above, decisions are made by vote; Absence of meetings and colleagues in the traditional sense. DAO organizational policy Note that DAO is also characterized by the presence of internal company policies, but it has a number of differences. In classic business, in particular, management determines the actions of the entire organization. In the case of DAO, the value is the main factor on which all efforts will be focused. Therefore, every community member, who decides the future of the compound protocol, is motivated to bring the maximum benefit without looking back at the leader’s wishes. Since the DAO model does not involve a centralized hierarchy, it relies on alternative approaches, such as token-based memberships. Typically, such governance tokens can be freely purchased and filed on decentralized exchanges , or earned by providing liquidity or computing power for mining or staking. In any case, by holding governance tokens, you become a kind of shareholder and gain access to voting, which determines the organization's development strategy. Managing the DAO: What Are Governance Tokens? Governance token — a token that allows its owner to take part in the management of an organization. Thanks to governance tokens, users can propose, discuss and make changes to the project, and they do not need to rely on the project team or require its participation. "DAO is an organization that can operate on its own, using code, without anyone's responsibility for decision-making," explains blockchain enthusiast Travis Miller. "Imagine a corporation without a CEO." In addition, participants can use tokens to delegate voting rights to other users and monitor the distribution of funds allocated to support the project. DAO in Crypto: Examples The first thing you should note is that the meaning of the DAO economy is to attract users to actively manage and develop the ecosystem of a particular platform. As a rule, users who participate in voting can receive a reward. Thanks to Ethereum , the built on smart contracts infrastructure of DAO has appeared in the crypto industry. There are few examples of DAO including Maker, Compound, Forth ( Ampleforth ). DAO Maker DAO Maker — is a decentralized platform based on Ethereum. It was the first who made it possible to create DAI stablecoins , and various other cryptocurrency assets are accepted as collateral. One of the main features of the DAO Maker platform is that the DAI stablecoin is always equal to US $ 1 per 1 DAI unit.  Since this is DAO on the platform uses governance tokens — MKR, a million of which were distributed between the first users of the platform. In the DAO Maker ecosystem, MKR tokens are used as the "fuel" of the entire system, just as gas is used in Ethereum. As soon as the commission is paid, the received MKR tokens are destroyed (burned). New MKR tokens are released as needed, so the system is constantly in a certain balance. Compound Another of the largest credit protocols in the DeFi. In addition to interest on issued loans secured by cryptocurrency, it charges creditors COMP tokens to motivate the community to issue more crypto loans. COMP tokens allow their owners to make decisions about changes to the Compound protocol. When the user enters tokens into the Compound pool, in return he receives cTokens. These cTokens represent the depositor's share of the pool and can be used at any time to redeem the underlying cryptocurrency originally deposited in the pool. For example, when deposited in an ETH pool, in return you will receive a cETH. Over time, the exchange rate of cTokens of the underlying asset increases, which means that you can exchange them for a larger amount of the underlying asset than you originally invested - this is how the interest distribution occurs. Ampleforth This is an Ethereum-based cryptocurrency with an algorithmically regulated number of tokens in the circulating offering. It is intended for use as the base currency of the new decentralized economy and is an asset that is not subject to demand inflation and remains independent of the price movement of other cryptocurrencies, in particular bitcoin (BTC). Besides AMPL the platform has governance tokens FORTH. Ampleforth has a 6-step protocol change process. When the proposal successfully passes the first five stages, the FORTH holders vote for the proposed change. If a majority is reached during voting, then the change is automatically made to the protocol. DAO Pros and Cons Pros: There is no hierarchical ladder, so a separate group or control center cannot make decisions that ignore the interests of the rest of the participants. Decentralized management system. With this approach, the actual power passes into the hands of only those persons who are really interested in this and are ready to develop the project. All rules, requirements and conditions for working with the DAO platform are known in advance and can only be changed with the approval of most owners of control tokens. As a result, only really useful offers "pass." All transaction records are publicly available, eliminating asset fraud. Cons: Slow response to threats. If something atypical happens, you need to vote among all governance token holders to solve the problem. At the same time, the decision must first be prepared by someone, which also requires certain costs. As a result, the reaction is very slow, which threatens potential problems. The development also requires a vote. Moreover, you need not only to offer a further way of development, but also to find an executor who will be ready to do the work. It slows down the development of the DAO platform. Despite the high potential of blockchain in managing systems, it hides many risks associated with protocol security. And history knows the hard chapter with the first DAO case in 2016, when the platform was hacked . But it connected with the organization of decentralized and open platforms. Anyway DAO attracts a lot of enthusiasts from different business areas, and has been already realized in such spheres as art, culture, gaming, automatizing and so on.
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Crypto for Free: Top 3 Bitcoin Faucets

Crypto for Free: Top 3 Bitcoin Faucets

June Katz 4 min read
What is a Bitcoin Faucet? Bitcoin Faucets are websites or apps where you can get a certain portion of BTC for free. In the past, when the main goal was promoting digital cryptocurrency among ordinary people, users could get up to 5 BTC for each claim. Nowadays, instead of Bitcoin, faucets give away Satoshi — its smallest indivisible unit equal to 1/100 millionth of BTC, for completing tasks ranging from playing games to watching ads or entering a captcha. It might not be clear from the get-go why there would be many websites giving crypto entirely for free, as it seems. Nowadays, these faucets collaborate with businesses and stay afloat as long as they make enough profit in ads. Since many people use such faucets and some of them can potentially be scams , find below a list of trustworthy Bitcoin faucets.  Best Bitcoin faucets Freebitcoin This is probably the most well-known Bitcoin faucet and it has more than 42 million users. There’s the traditional way of getting BTC when you get coins every now and then and the website also holds things like games, online casinos, and weekly lotteries. They even advertise winning a Lamborghini on the main page. The website claims that one can win up to the 200-dollar value of BTC playing the games or up to 1 BTC playing HI-LO. It’s important to keep in mind that it’s less likely to win the maximum amount offered and these big numbers are used as a way to attract users. The website says one can deposit coins with an interest rate of 4.08%. The referral program is quite generous since it guarantees the user about 50 percent of what their friends are winning on the platform, and it also shows the current price of BTC. The website has a premium version and its own token. Even though the website is famous, it resembles an online casino by design and has too many distractions.  Cointiply Founded in 2018, this faucet offers you to watch ads and videos, and play games. The website possesses loyalty and referral features, as well as expert support. Compared to the previous one, it has a more pleasant design and doesn’t resemble a gimmick. It has almost 2 million users and is available on Google Play. Given that one can claim 200 Satoshi approximately every hour, one can withdraw 35 thousand Satoshi to a built-in wallet and 100 thousand directly to your Bitcoin wallet. This website is less generous in terms of the referral program since it only offers 25% for claims and 10% for the earnings. There’s a loyalty program where under the condition that the user logs in daily, one can get up to 100% in bonuses. Once the user possesses 35 thousand coins, a 5% interest rate is guaranteed. The website also has a FAQ where one can find answers about the platform, as well as tips on how to use it more effectively.  Firefaucet What stands out for this particular platform is that it is multi-currency. If BTC is not necessarily your coin of choice, you can get Tether, Ethereum , Dogecoin , Litecoin , Dash , Tron , DigiByte , and ZCash on this website. It also has quite a minimalistic design which stands out from other ones where there are luring ads and such. It has a little bit more than 600 thousand users and the coins can be stored on the built-in wallet or your own without any fees. It claims it has the highest rates but one can’t find any exact percentage on the main page. A nice feature is that the website has no pop-up ads. Conclusion Such faucets are suitable for beginners as a good way to acquire some cryptocurrency with little effort and no financial loss. Many of them require your wallet information and have referral programs where you get bonuses for inviting people to the platform. Since possessing BTC, even as little as such websites offer, is a dream for many, we advise you to be careful and use critical thinking when visiting such places. There’s always a chance for the website to turn out to be a scam or use your personal information. If you feel hesitant about a certain website or an action it asks you to perform, do your research and read public reviews on it. Since some faucets use techniques similar to gambling, don’t forget to be responsible for how you spend your time there. It’s worth paying attention to the number of coins for each claim, how much you can withdraw and with which method, and how big the fees are. A good tactic is registering on multiple faucets, comparing them to each other, and multiplying your gains. It’s also important to keep in mind that the terms and conditions of a particular Bitcoin faucet can change over time.
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Top 6 DeFi Exchanges in 2021

Top 6 DeFi Exchanges in 2021

June Katz 5 min read
Introduction One of the most remarkable moments for the crypto industry in 2020 took place in August, when decentralized exchanges (DEXs) surprised the world with a trading volume growth of 247% with respect to the previous month, while centralized exchanges (CEXs) could “only” keep it up to the humble amount of an 85% growth. Fast developments in the DeFi space such as liquidity mining , yield farming, and governance tokens have mostly been the ones responsible for the huge increase in trading on DEXs. Let’s find out what makes them so attractive and which ones you should keep an eye on: Characteristics of DEXs Non-custodial: Popular CEXs like Binance or Coinbase have frequently been criticized for their ability to be the ultimate custodians of any user’s private keys , and therefore their assets. Some may argue that this allows them to manipulate funds as they see fit, just like banks hold their customers’ fiats and move them around all the time. At DEXs, this is no longer possible because irrevocable ownership of the assets is guaranteed to any user.Automated: Most DEXs use the Automated Market Maker (AMM) algorithm to facilitate trading, which allows fast transactions free of intermediaries and keeps liquidity at healthy levels. Low trading fees and intuitive interface: swapping digital assets without having to break down the trickiness of the process had never been so inexpensive as with DEXs.  A higher degree of anonymity: only a link to a wallet is required to start trading, no need to spend your time signing up and filling in your social security number and other personal data to be granted access. How do DEXs work?  Sellers and buyers are connected through a global liquidity pool, which instead of being centrally managed and organized, works on a series of self-executing smart contracts that include automated processes to bring each transaction to its best price. Usually, any user must connect their external wallet, where they can easily deposit their funds in fiat and convert them into cryptos so that they can operate at the DEX with the cryptocurrency of their choice.One of the main disadvantages that most DEXs present is the absence of an option to swap fiat for cryptocurrencies at their platforms. While there are a few DEXs that allow this possibility, most of them will require you to trade with a cryptocurrency that you will have to hold in your possession previously. Key DEXs features to ponder Slippage: this is usually the product of high volatility in the markets when large price fluctuations make the trade take place at a lower price than the one attempted for in the first place. Good protection against this can be applied by trying to avoid trading coin pairs with respectively low market cap, despite most DEXs will show you the expected slippage on their sites.  Trading volume: it’s no secret that exchanges with larger relative volume will reach a wider audience and therefore become a higher trusted place.  Audit record: Every reputable DEX will have to go through strict scrutiny before they’re allowed to be publicly available. Checking for audit history is never a bad idea when choosing to trade on a new platform. Beta mode: you may encounter a few exchange projects that have not yet been developed to their full potential. While some of them could perfectly be the next big thing, it is a riskier choice for newcomers who are looking for some first experience. Social media: surveying the social platforms of projects will show you how engaged their community is with them and among themselves, which is a good metric to decide your DEX of choice on. Best decentralized exchange: top picks Uniswap Probably the most popular DEX of the industry since August 2020, Uniswap was born to serve 2 purposes that have proven to be highly successful. The first one was to be an exchange within the Ethereum ecosystem, and the second one to use its own liquidity providing protocol, otherwise known as the automated market maker. It currently supports any pair of swapping with Ethereum assets and has low gas fees. Curve Curve is the place to go if you’re looking for one of the most efficient stablecoin trading exchanges at an incredibly low rate of slippage. With a simple interface and some of the safest smart contracts in the entire DeFi landscape, Curve is an excellent place to trade any of the most popular stablecoins like DAI , USDC, USDT, TUSD, BUSD, PAX, and sUSD . Kyber This on-chain liquidity protocol acts both as an Ethereum-based smart contract swapping platform, and as a liquidity aggregator that always uses the pool with the best exchange rate possible, regardless of where the orders have been placed from. Its liquidity-accessing interface can be integrated from: smart contracts and Dapps to wallets and vendors. They use their native token, Kyber Network Crystals ($KNC), for rewards in trading fees and governance.  Bisq Bisq is a simple and intuitive DeFi project where trading fiat for well over 120 cryptocurrencies is possible. Their degree of decentralization is such that there isn’t even an automated mechanism for finding the best matches between buyers and sellers. Instead, users must manually search for orders in their trading pair of choice, which Bisq argues to be the truest form of peer-to-peer trading. Operating as a client and not as a company, they guarantee that security, non-censorship, and transparency will never be taken away by anything or anyone.  1inch 1inch is one of the leading DEX aggregators of the market, which works by connecting users to the best and cheapest prices of different DEXs. Trading fees vary across different exchanges, and 1inch has found a way to automatically connect any user with the best deal they can get. On Christmas Day 2020, they launched their own 1INCH governance token, which users can buy and hold to vote on how the platform is run.  0x 0x is where tokenization happens. Literally. This revolutionary project believes in the possibility to create tokens for virtually any form of value, whether it be cryptocurrencies, bonds, real estate, or software licenses. They firmly believe that what the internet did to information, public blockchains can do to financial services. Their own token is ZRX, used to pay for transaction fees and since 2019, acting as a governance mechanism as well.  Conclusion DEXs’ popularity and usability are growing at a fast pace and it is highly supported by the significant progress made in their technology. There’s plenty of reasons to expect their presence to increase and to keep on gaining market share to CEXs, as DeFi continues to develop at high speed. There’s still room for improvement and disadvantages to be taken care of, but with a growing community of users rooting for decentralization, we expect DEXs to be a major player in the future. 
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What Are DeFi Liquidity Pools and How Do They Work?

What Are DeFi Liquidity Pools and How Do They Work?

June Katz 5 min read
Gone are the days when trading was exclusively done by the order book model, where someone willing to sell would have to find someone willing to buy at the same price for the trade to become successful. The presence of market makers willing to buy and sell at any given time would eliminate the liquidity problem. In a world with no transaction fees , this would be the optimal solution, although that’s not the case for crypto markets, where gas fees have been steadily increasing for the past years. DeFi liquidity pools have become the solution to this problem, and here’s exactly why. Let’s say you put a single pair of different tokens into a pool and you lock them in a smart contract. That single transaction creates a market at which the price of a token depends upon the price of the other, which is why the first liquidity provider (LP) sets the initial price of the assets. This incentivizes the LP to supply an equal value of the two tokens, given that if they decide to diverge from the current global price of any of the tokens, an opportunity for arbitrage will be created and the LP might suffer a capital loss. Consequently, all the following LPs that decide to add more tokens to a liquidity pool must follow the rule of equal value among both tokens. Each token swap occurring in a liquidity pool is followed by a price adjustment set by an algorithm known as the Automated Market Maker (AMM), the mechanism through which the product of tokens can be held constant. For instance, if someone buys ETH from a DAI -ETH pool, the quantity of ETH will decrease, which will then push the price upwards. At the same time, the relative price of DAI will decrease as the AMM will force the quantity of DAI to increase to compensate for the loss of ETH on the pool. A large trade on a small pool will affect the relative prices significantly. Hence, the larger the pool, the bigger the size of trades it can accommodate without seeing big fluctuations in prices.  What are examples of major DeFi liquidity pools? Uniswap Uniswap is a decentralized token exchange that operates with a 50% reserve of Ethereum contracts, and another 50% reserve of ERC-20 tokens , such as Maker (MKR), or Tether (USDT). Trading ETH for any of the ERC-20 standard tokens can be done through this open-source platform. It also allows you to provide liquidity to the pool by simply depositing any pair of the supported tokens at a 50/50 ratio — and in exchange, you’ll receive an equivalent amount of Uniswap tokens that will entitle you to collect the proportional amount of a 0.3% fee for every trade taking place at the pool, which is distributed among all Uniswap token holders. The most popular pools on Uniswap include DAI-ETH, ETH-USDT, and WBTC-ETH. Balancer  Initially a digital exchange platform, Balancer has transitioned into one of the most exciting DeFi liquidity pools of the moment. In this non-custodial portfolio manager, users create funds based on the cryptocurrencies in their portfolios. These do not need to follow the standard 50/50 proportion that helps keep the AMM constant, as Balancer supports pools with up to 8 different tokens. Moreover, providing liquidity to a Balancer pool is rewarded with the platform's own BAL tokens and a portion of the trading fees whenever the network uses the liquidity that LP has put into the pool to trade. MKR-WETH, BAL-WETH, and WETH-DAI-USDC are among the most popular pools of Balancer. Bancor Based on Ethereum, Bancor is a liquidity pool platform with some interesting features that make it stand out against other competitors. It uses similar AMM mechanisms as Uniswap or Balancer, although it has a varying transaction fee that usually oscillates between 0.1 and 0.5%. Furthermore, its pooling system allows Ethereum, EOS tokens, its own BNT token, and its stable coin USDB. The most popular pools on Bancor include USDT-BNT and USDC/BNT. What are the risks of DeFi liquidity pools?  One of the most common risks associated with DeFi liquidity pools is a phenomenon known as impermanent loss. When someone is holding a digital asset in their wallet, their market value may increase or decrease as the markets determine their price. However, when a digital asset held at a liquidity pool appreciates with respect to its pairing token, there is room for arbitrage. Outsiders may come to the pool and buy that same asset for a cheaper price, and then sell it in the global markets to gain a profit. If the liquidity provider decides to withdraw their assets at this point, their loss will become permanent, whereas if they leave it on the pool and wait for the prices to match again, their loss will have just been temporary, and therefore impermanent. Note that some platforms, like aforementioned Bancor, offer mechanisms to protect the LPs from impermanent loss (although not in all cases, so read the fine print carefully!). Another risk that has been faced previously is smart contracts failure. This usually happens when the platforms are not audited or their coding security isn’t secure enough to resist data attacks.  What are the benefits of DeFi liquidity pools? Becoming a liquidity provider has proven to be a profitable activity that has led to the expansion of platforms like Uniswap. Easing the problem of liquidity for a rapidly growing community not only strengthens the network and facilitates trading, but also allows liquidity providers to earn transaction fees from each trade that happens on their pool. As a result, although the trading platforms that utilize liquidity pools usually specialize in a relatively small number of tokens — unlike larger exchanges or aggregators such as SwapSpace — they can have a thriving ecosystem around them. Additionally, rewards in the form of platform tokens are a standard incentive for liquidity providers, as the platforms want their token pools to preserve their size and increase it more than anything else. These tokens usually increase their market value as the project unfolds successfully, which has happened over the last month with Uniswap and SushiSwap tokens. How can I join DeFi liquidity pools? Each platform keeps its own procedure to gain access to its pools, although, for the most part, a standard Ethereum wallet will need to be connected to your new account on the desired platform, and after the corresponding verification processes you will be able to start depositing tokens on the pool of your choice. While it is never a difficult procedure to carry out, it is important to keep an eye on the returns, transaction fees, and exchange rates.
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