What If You Can Make Money Like A Bank?
The order book model requires buyer and seller to agree on a certain price for a successful transaction and is managed by a liquidity provider or market maker.
The liquidity provider makes a profit from the spread, the difference between the bid and ask price.
Bid price (Buyer) : $1
Ask price (Seller) : $2
Spread: $2 - $1 = $1
In this example, the spread is $1 if the buyer agrees to the seller's price.
Liquidity providers here are banks, financial institutions, and trading firms so it is almost IMPOSSIBLE for you to become a liquidity provider.
No banks, financial institutions, trading firms, and centralized authorities here.
Successful transactions are made using the Liquidity Pool model which is also an automated market maker governed by smart contracts with lots of programming codes.
The transaction method remains the same for both worlds. You still need to give something to get something.
In the real world, you need to give USD (the main currency) to get TESLA stocks because TESLA is paired with USD.
In the crypto world, Binance Coin (BNB) and BUSD (which have an equal value to USD) are the main currency tokens. You need to give BNB or BUSD to get a crypto token.
To become a liquidity provider of a crypto token, you need to give 50% of BNB/BUSD and 50% of that token's value.
The liquidity provider will make money from the transaction fees that are done on that token's liquidity pool based on their capital.
Total LP: $2000
Total Providers: 2
Your Investment: $1000 ($500 BNB/BUSD : $500 token value)
Your Ownership %: 50%
Total Transaction Fees: $1000
Your Profits: $1000 * 50% = $500
So, what if you can automate the process of giving 50% BNB/BUSD and 50% of the token value?
Let me introduce you to the highly advanced technological world of Pi Protocol.
This project will automatically help you to give 50% of BNB and 50% of their tokens value) and you will get a Liquidity Pool (LP) wrapper token in return.
To indicate your ownership % as a liquidity provider in any crypto token, you are given an LP token. In most cases, this token will do nothing in your wallet until you exchange them back for your capital.
In Pi Protocol, the LP token is locked forever and you cannot exchange your LP wrapper token back for your capital. If you choose to exit the SCircle LP in Pi Protocol, there is an option for you to sell the SCircle LP wrapper token for 50% of your capital.
You can also use the LP wrapper token and stake it to get higher returns on your capital. A certain % of all transaction fees will be used as staking pool rewards.
If you don't know what staking is, it is similar to mining but you do it with coins/tokens instead of a mining machine.
Pi Protocol also uses an innovative function to keep its token prices and charts stable and healthy.
Total Supply: 1000 PIP tokens
LP: 100 BNB: 1000 PIP tokens
Locked Supply: 700 PIP tokens locked (70%)
Circulating Supply: 300 PIP tokens (30%)
Only 300 PIP tokens or 30% of the supply can be sold. Another 700 PIP tokens in the LP can never be sold because they are locked forever.
As Pi Protocol only needs 30 BNB to manage the 300 PIP tokens circulating supply, the project can safely take out 70 BNB from the LP because they can never be touched.
This extra 70 BNB can then be used to help the project and the community with market buybacks, adding to staking rewards, and even adding more liquidity.
This function is called the price floor sweeper and this EXAMPLE ignores price impact.