Architecture of the # token
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Liquidity token - a token that is being distributed in the course of providing liquidity to other tokens. Examples of liquidity tokens include Cake ( Pancake Swap ) or Uniswap. Typically, the primary use of liquidity tokens is to manage the protocol on which their distribution process takes place. The problem with liquidity tokens is that there is no constant source of demand for the token.
Platform token - a token associated with a specific platform. Many launchpads offer their own platform token and part of the revenue generated on the platforms goes into the payment token in the form of buyback&burn or staking.
Buyback - repurchase of tokens from a liquidity pool.
Burn - burning tokens to prevent their further trading and sale.
Staking - locking tokens of different types over time to obtain new tokens in circulation or tokens from a specific source.
Liquidity pool - a pair of tokens whose mutual ratio determines the price. If you buy A tokens for B tokens in an A / B pair, the number of B tokens increases in proportion to the A tokens, resulting in a higher price for A tokens. Liquidity pools intermingle to create routes. The exchange between intermediary tokens creates demand for all intermediary pools along the route. In this example, we have omitted the issue of commissions for the liquidity provider and greatly simplified the calculation.
Liquidity - the depth and ease of exchange between value carriers. The greater the liquidity, the smaller the price fluctuations during the exchange. Liquidity Providers make money when trading the liquidity they provide and during liquidity mining.
Liquidity Mining - an additional incentive to provide liquidity is so-called process of liquidity mining. During regular liquidity provision, providers earn a total of around 0.3% of the value of each trade (Uniswap V2), where profits are split proportionally to the share in the pool. After liquidity provision, LP tokens are received as proof of the process. By staking LP tokens we earn double, both from providing liquidity and in new tokens in circulation.
