LP Mining vs Single Token Mining: What Are the Differences?
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With the wide array of products available in the crypto space, it is essential for us to understand what we are getting into. New products come up in the crypto space so very often, where terms can be used interchangeably at times. If you encounter confusing terms and draw little to no understanding of what it is from time to time, fret not, you are not alone.
What is LP mining?
LP mining is a high-yield product provided by CoinWind. It involves pairing an asset with another, where you will be using these tokens to provide liquidity for both trading pairs. The trading pairs usually involve at least one well-known pair to ensure that transactions are executed smoothly.
- Step 1: The user provides liquidity by pairing assets on a corresponding DEX
- Step 2: The DEX issues the trading pair in the form of an LP token to the user.
- Step 3: The user can now deposit the LP token into CoinWind to gain revenue.
- Step 4: CoinWind will invest the LP token into the desired project, where reinvestment will occur regularly to maximize profits
- Efficient and Simplified: The contract automatically reinvests regularly according to the suggested strategies. Users don’t have to worry about complex operations.
- Lowered Vost: Transaction fees generated by reinvestment will be paid by the platform
- Autonomous Compounding: Income generated from deposit and withdrawal is automatically collected causing the compound interest income to increase.
What is Single token mining?
Single token mining has drawn the same idea from LP mining where a user can add liquidity to obtain token rewards. However, in this case, the user is only required to pledge a single currency for liquidity mining to occur. This is made possible as CoinWind automatically matches the pledged currencies through smart contracts and hedges against impermanent losses to maximize your income.
- No impermanent loss
- Automatic reinvestment of profits
- Low participation threshold and deposit
- Withdraw as you go
- Contracts are automatically hedged to reduce the risk of impermanent losses and to ensure returns are maximized
What is the difference between LP pools and Single token mining?
The main obvious difference between LP pools and single token mining is that LP pools require the pairing of 2 separate assets, while single token mining only requires 1 asset. Therefore, this would mean that the only loss one could incur would be from potential price fluctuations.
With CoinWind’s autonomous matching and hedging strategies, we effectively solve the risk of low income from single token mining and large losses from LP mining.
The last thing we want for our clients is to ape into things they don’t understand, therefore I hope this article clarifies some doubts you may have about the different types of products we offer at CoinWind. Please feel free to comment below if you would like to see similar articles regarding other topics!