Decentralized exchanges (DEXs) have ushered in a new era of permissionless crypto asset trading, and OTX (Open Trade Exchange) stands at the forefront of this revolution. Unlike centralized exchanges, OTX enables users to trade any crypto-asset directly with others, facilitated by individuals adding liquidity to trading pairs. The addition of liquidity is crucial for the smooth functioning of the exchange, and OTX incentivizes liquidity providers by sharing a portion of the DEX fees with them.

The Significance of Liquidity
Liquidity plays a pivotal role in the accuracy of asset values and the overall functionality of a trading pair. Inadequate liquidity can lead to distorted prices, slower trades, and increased slippage — deviations from expected trade prices at execution. DEXs address these challenges by rewarding liquidity providers to maintain healthy liquidity levels. Moreover, low liquidity results in slower trades and more substantial slippage, where the actual trade price differs from the expected price.

Adding Liquidity on OTX DEX
DEXs ensure healthy liquidity levels by rewarding those who contribute to liquidity pools. This ensures that trading on DEXs remains reliable and efficient.

Adding liquidity involves contributing to a specific trading pair’s liquidity pool, typically represented as “pools” or “liquidity pools.”Each trading pair on OTX DEX has its liquidity pool, forming the foundation for seamless transactions. The process involves depositing specified crypto assets into the pool, usually equal to the two assets constituting the pair. For instance, a famous OTX DEX trading pair might require an equal value of OTX and another cryptocurrency based on the current market price.

While the technical details may vary slightly, the general process is consistent across DEXs. The smart contract generates a token as a receipt, which you can use to claim rewards and withdraw your deposited crypto assets. It’s important to note that the ratio of returned crypto assets may differ from your initial deposit.

Requirements for Providing Liquidity on OTX DEX
● Digital Wallet: A digital wallet, also known as a crypto wallet or web3 wallet, is necessary to store cryptocurrencies and other digital assets. It’s essential to use a self-custodial wallet like the OTX DEX. Self-custodial wallets grant you complete control over your purchases, unlike custodial wallets, where a third party holds ultimate power.

● Cryptocurrency: Your wallet should contain the cryptocurrency needed to cover transaction fees and facilitate swaps. Transaction fees are typically paid in the native currency of the blockchain, such as ETH for Ethereum. Since liquidity pools consist of pairs of crypto assets, you’ll need a balanced amount of the two acquisitions in the pair to provide liquidity effectively.

● DEX Site: Selecting a reputable decentralized exchange that offers substantial trading volume is crucial. The following section will introduce you to OTX DEX, an ideal exchange for liquidity providers.

OTX DEX Pools
OTX DEX Pools incentivize liquidity providers by offering a share of trading fees. For example, 0.25% of trading volume is distributed to liquidity providers, fostering a proportional earning mechanism based on the contributed liquidity. Users can track their positions and earnings through the Pools tab on the OTX DEX platform or utilize third-party DeFi tools.

Key Terms
● Liquidity: Liquidity is crucial to any market’s health, whether in crypto or traditional finance. It gauges how easily two assets can be exchanged without causing significant price shifts in either asset. Poor liquidity can lead to dramatic price changes with even small transactions.

● Pool (Liquidity Pool): A pool is the collection of funds designated for a specific trading pair (e.g., OTX-WETH) on a DEX. Liquidity providers in a pool receive a portion of the trading fees generated.

● Exchange Fee: DEXs charge a small percentage of every swap as an exchange fee for trade facilitation.

Contributing to Pools and Earn Yield Participating in liquidity pools on a DEX is a straightforward process. First, explore the APY (Annual Percentage Yield) offered by various pools on the DEX. Once you’ve identified a pool of interest, deposit the required crypto assets. The DEX will provide a platform for you to monitor your rewards.

Engaging with OTX DEX is designed to be user-friendly, making it accessible even for beginners seeking to contribute liquidity and earn yields. Join us in contributing to liquidity pools and embracing the world of decentralized finance with OTX.