The situation is not about the transaction happening on the ethereum network but the fact that providing liquidity in an exchange gives one opportunity to earn passive income .
By providing liquidity , you supply tokens and their pair to exchange companies which they use to facilitate trading. You earn from the transaction fees. I will write a detailed post on it later
Well if it's only by providing liquidity, you won't earn much. You can check the current Apy at Uniswap. Exchanges like Uniswap decided to reward liquidity providers out of the income they generate from fees as a was to encourage them. 1inch does the same too so those rewards can come in form of boosted Apy, airdrops and so on.
In providing liquidity , everyone do not earn equal rate. Your earning is a function of the amount of money you supplied , the time at which you supplied it and the number of people in the pool . people earn well from APR.
Yes your earning depends on the amount of money you provide as liquidity same with staking and farming. Remember the Apr reduces with time so you earn lesser with time. Uniswap do airdrop tokens to their users to compensate.
I think the APR reduces as more people joins the pool and not a function of time . There are many staking with high APR simply because people do not use them ,mostly those in ethereum network
Yes that's what I meant apologies for not stating it plainly. More people join with time. Let's say Apr starts at 300% now,come back in some hours or days time when more people joins,it'll reduce to 60% or so unless it is fixed.
Wow, this is massive... For then to realise $1 billion just for providing liquidity. And its does not comprises with the amount of transaction carried out on the exchange...
How does liquidity provision work? Does this mean they lock their coins for a fixed time in return for interest? I find it hard to differentiate this and staking of coins.
