RE: Crux of AMM: Yield vs Volatility
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I keep rereading this because there’s a lot here to unpack. Even though I understand why what your saying is correct I still like to read it so it sinks in…
I definitely agree with your points and I have lived with Tron,Uniswap, and now Cubfinance and PanCakeSwap, plus on the Polygon side learned lessons from PolyZap, Polycat and of course Iron Finance.
I think your dead on or spot on…
LPs provide capitol in the form of dollar equivalent asset pairs earning transaction fees on Uniswap and project token inflation on yield farms. The printing of project tokens is inflation and inflationary, plus creates selling pressure as yield farmers convert project tokens to Eth, btc and other non-project tokens…
LPs suffer impermanent loss which if it isn’t balanced by transaction fees must be balanced or really exceeded by project token inflation given as rewards. Otherwise non-one wants to provide liquidity.
Stable coin pairs eliminate impermanent loss and stable coin to non-stable coin pairs half it. I have lived these things and declare they are real.
The truly amazing thing is that this whole DeFi LP ecosystem isn’t going away… probably never….
And if we amass enough crypto we will be able to generate enough income to never work again.
And if by some tragedy we lose everything, we have the knowledge to rebuild our fortunes again. This knowledge makes us free.
That’s what is truly amazing.
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