Cryptocurrencies have changed the way people invest their money. In addition to fixed income funds, real estate funds, and multi-market funds, there is a modality well-known to blockchain enthusiasts: investments in liquidity pools.
What’s more: it’s not necessary to use only cryptocurrencies like Bitcoin (BTC) or Ether (ETH) to invest. The stablecoin BRZ, issued and controlled by Transfero, is also inserted in this digital financial ecosystem.
Users interested in earning returns over time, but without the need to perform manual buy and sell transactions of crypto assets, can take advantage of liquidity pools and optimize their portfolios.
What is a liquidity pool and what is it for?
In a simplified way, it is a set of digital assets locked in a smart contract, responsible for facilitating trades both on decentralized exchanges (DEX) and for generating passive income.
All parameters are pre-established, which means that by agreeing to invest in a liquidity pool, you affirm that you agree with all the terms and conditions linked to it. Any changes that may be implemented in the contract will be automatically informed to the respective interested parties.
Due to the participation of investors in the network, it is possible to monetize in liquidity pools in numerous ways, such as through trading fees, protocol incentives (Yield Farming) or even airdrops (random tokens that are sent as a reward to participants).
The composition of the asset basket in a pool defines its degree of profitability and volatility. Newer cryptocurrencies tend to present a more aggressive performance, while the more consolidated and conservative ones aim for more modest, albeit more consistent, returns. It is important to reinforce that this is only a trend, given the dynamic nature of the crypto universe.
How to invest in the BRZ/USDC pool on Pharaoh Exchange?
Pharaoh Exchange is the largest DEX on Avalanche (AVAX), an open-source protocol known for its high security, scalability and focus on decentralized applications (dApps). Through it, it is possible to invest in a BRZ/USDC pool (Brazilian Digital Token, from Transfero, and USD Coin, from Oracle).
These are the necessary steps to invest BRZ tokens within the platform quickly and safely:
- Access the protocol page: https://pharaoh.exchange/
- In the upper right corner of the screen, click on Connect Wallet and choose your preferred digital wallet from the list. Follow the steps on the screen until the public key appears in the place where the button was.
- Click on Liquidity and type “BRZ” in the search bar. Click on Deposit.
- It is necessary to stipulate a “price range” in which the liquidity will be provided. The more concentrated the range, the greater the potential return. However, if the price of BRZ goes outside this range, the funds will not generate rewards until they return to the defined range. For example: if the range is configured for BRZ/USD 5.50 – 6.00, values above this range will not generate profits until they return to the previously established position.
Important: It is possible to simulate the returns before proceeding. It is recommended to do so to get an idea of how the market has behaved in recent times according to each risk profile.
- Three transactions are required to complete the process:
- Approval of the contract for BRZ movement;
- Approval of the contract for USDC movement;
- Deposit of liquidity, which generates an NFT representing the position in the pool.
- After the creation of the NFT, it can be staked so that users receive their returns in PHAR, the native token of the Pharaoh platform. The value of the currency can be tracked both within the DEX and on independent platforms, such as CoinMarketCap.
- To track returns and make withdrawals and deposits whenever you want, simply access the dashboard on Aerodrome: https://pharaoh.exchange/dashboard
How to remove the balance applied in the liquidity pool?
If it is necessary to withdraw the money invested in the Avalanche pool, simply remove the NFT from the stake and then withdraw the liquidity from the NFT, reversing the flow exemplified above. The process takes only a few moments to complete.
A new opportunity for users
BRZ holders can take advantage of this investment modality with the potential to generate passive income. Both traditional assets and those created by decentralized initiatives are used in liquidity pools to strengthen their respective networks and reward investors for their efforts.
As it is a decentralized exchange, the way its customers log in and conduct trades is a little different from centralized ones. However, the process is quite simple and does not require extensive prior knowledge to be completed.
Instead of making a single more aggressive or more conservative contribution, it is possible to allocate the balance in several ways. For example, 80% in milder and safer passive income, 15% in a more moderate option and 5% in a more comprehensive way.
The greater the possibility of return, the greater the risk. It is important to keep this in mind when allocating funds. Doing it wisely is essential to ensure not only personal financial health, but also that of the entire digital financial ecosystem.
