What are liquidity pools and how can they be used to add value to your cryptocurrency? What is a rug pull in cryptocurrencies?
For example, suppose a buyer comes in and wants to buy 50 tokens at the current price. Hi guys this is your boy Lisa Lanky and today in this video we are going to talk about some important questions you had while creating your own cryptocurrency how to
Give a value to your cryptocurrency and how it increases, how to set the market cap for your token and much more. So watch this video till the end to clear and answer all your doubts yourself in this video and also learn all about liquidity pools in one
Video, so first, let’s answer the main question of how to add value to your cryptocurrency. The answer to this question is actually quite simple: create a liquidity pool for it on an exchange like Pancake Swap or Uni Swap, if you’ve seen my previous video where I provided an actual token
You noticed on the BSC network that I also created a liquidity pool for this on the pancakes web. The reason for this was to set the value of my cryptocurrency. Now that you know that liquidity pools are very important for this step, let’s also understand what it is and how
In order to determine the value of your cryptocurrency, liquidity pools are always formed with two cryptocurrencies. When you create it to set the value of your token, one of these cryptocurrencies must be set to your token and the other can be a popular cryptocurrency like
Eth BNB through which people will actually buy your tokens to thoroughly understand the liquidity pools. Let’s take a look at my laptop Example: Hundred tokens t stand
As for tokens, my tokens I created and here BNB is the other cryptocurrency. Remember I told you that liquidity pools are always set up with two cryptocurrencies, so one is usually your token because you want to price those, and the other is a popular well-known cryptocurrency
Like BNB or Ethereum or something like that, usually a stablecoin that doesn’t change value, so now I’ve created liquidity with 100 tokens and 100 BNBs, ok, so that liquidity is created and at the same time my value of the tokens set. I don’t have to set it
Umm else, so if you see that 100 tokens are now worth 100 BNB, that means a token is worth 1 BNB. If I invested 150 BNB then that would mean one token is worth 1.5 BNB, okay that’s how you set your price and that’s how you create the liquidity pool
For example, suppose a buyer comes in and wants to buy 50 tokens at the current price. Okay, he wants to buy it at the current price, that means he has to pay 50 BNB in exchange to get 50 tokens right, because that is the current price for one token equals one BNB
So he invests 50 BNB to get 50 tokens in the real world now. So this liquidity pool would be a lot bigger, okay, so it wouldn’t be 100 BNB, it would be a lot bigger, and not 100 tokens, it’ll be a lot bigger too
So, in this example, if you make such a transaction, the value will change by a large amount. We did that on purpose so you can see how much the value changes and how it all plays out. But for now, just be aware that he won’t get 50 tokens if he does that
Because of slippage he will get a lot less there will be fees there will be all sorts of things so he won’t get 50 tokens which is a lot less than that ok so he invests 50 BNBs he gets out 50 tokens on the pancake swap, if you do that
You will receive an estimated amount of tokens that you will receive after the transaction. So look at the tokens and calculate them again. You will find that you don’t get the full amount, let’s say for example you got 50 tokens in the estimated part
They will only get say 40 or 30 tokens so I got that sorted so now let’s jump back to the example where he deposits 50 BNB and gets 50 tokens out. Now this liquidity pool is changing properly because 50 tokens have been taken out and 50 BNB have been added
So it changes to 50 tokens because it was 100 tokens 50 minus 100 before, and it goes down to 50 tokens and err 150 BNBs because 50 was added. So this is the new liquidity pool, so the price of our token stays the same because the
Demand for our token has increased, we can clearly see many people are buying it. This person just bought it so the demand for our token has gone up so the price should go up too right that works fine how it works the new liquidity pool is now used
To price the token such that 50 tokens are worth 150 BNB here means that one token is worth 150 times 50, so three BNB. The price has tripled in just one transaction. Therefore, a large liquidity pool is very important for a new cryptocurrency
To enter the market please ensure you have a good liquidity pool. Set up a sufficient amount of BNBs or tokens in your liquidity pool so that it doesn’t impact the price that much. Okay, so other thing I
For example, I wanted to address one person getting in fine, so let me just backtrack. For example, say this is the liquidity pool we just set up instead of buying 50 tokens. He comes and says I want to buy 200 tokens
Now there aren’t 200 tokens in the liquidity pool so this swap would happen no he won’t be able to invest more than 100 BNBs in this liquidity pool so that’s the whole catch of it and that’s why , if you want one there is a lot of trading
In your liquidity pool in your token you then have to set a higher liquidity pool, you have to set a lot of BNBs or Ethereum whatever you put in it, a lot of it so that trading is smooth and prices don’t fluctuate
So much different is that there is a concept of rug pool. Okay, I want to address that because a lot of people get scammed because Rockpool is basically being told that, for example, this person, um, just bought it, bought 50 tokens and gave 50 billion to the liquidity provider, now the liquidity provider
Removes this liquidity. What happens after that is that those 50 tokens have no value again because the value was fixed based on the liquidity pool. If the liquidity pool is not there then the tokens are worthless ok so it removes the liquidity and is left with 150 BNB and 50 tokens
50 tokens have no value except 150 BNB. He originally invested 100 BNB, now he has 150 BNB. Therefore, this rug pool concept is ethically and morally wrong and should not be done. It’s also illegal in many countries, so there’s a safety net for it
The traders and that is the liquidity lock so you can also lock the liquidity. You can see if the person has the liquidity blocked and if they have the liquidity blocked which means it is safe to invest in it at least for the period until they are blocked
So yes, that was the whole concept of liquidity pools and I hope you got it
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