Binance has announced the launch of the first AMM protocol on a centralized exchange.
It is called Binance Liquid Swap and is an Automated Market Maker (AMM) pool that allows users of the exchange to place tokens in a pool to obtain instant liquidity, faster transactions and interest.
In fact, users who deposit funds into liquidity pools are able to earn interest and profits from fees generated by trading on Binance Liquid Swap.
This protocol is based on several liquidity pools that allow users to trade crypto assets using an AMM pricing module, instead of an order book, to provide more stable prices and lower commissions for small and large transactions.
Therefore, by becoming a liquidity provider and depositing tokens on Binance Liquid Swap, it is possible to obtain interest and profits from the trades that take place within the pool.
When launched, instant swap functionality will be provided for the USDT/BUSD, BUSD/DAI and USDT/DAI pairs.
The transaction fee, and the price of the two crypto assets available in each Binance Liquid Swap pool, are determined by the number of assets in the liquidity pool. Therefore traders who add funds to the liquidity pool and trade the assets will influence the price of the crypto assets, in the same way, that traders who add and remove funds from a liquidity pool are involved in market making.
The CEO of Binance, Changpeng CZ Zhao, said:
“We hope to further the growth of the DeFi marketplace and empower our users with more earning power and easier liquidity through a centralized AMM pool with the credibility, safety and security provided by Binance. We are looking forward to encouraging more growth of the DeFi market with Binance Liquid Swap, by allowing retail users to provide liquidity in instant swaps as DeFi products attract more volume and participants. And, with an incentivized pool design that benefits our community, from the community”.