How to earn passive income as a Liquidity Provider at digitra.com?

You can earn daily passive income as a liquidity provider in digitra.com. Learn how it works!
How to earn passive income as a Liquidity Provider at digitra.com?

In the financial world, liquidity is crucial. Imagine wanting to sell something but finding no interested buyers, or vice versa, wanting to buy something but finding no available sellers. That's a lack of liquidity. In the cryptocurrency market, liquidity is even more critical, as it directly affects the ease and speed with which you can trade digital assets.

This is where digitra.com's Liquidity Providers come in. But before we delve into this passive income opportunity, let's understand what liquidity is in the financial market and the role of liquidity providers.

What is liquidity?

In simple terms, liquidity is the ability to trade an asset quickly without impacting its market price. The more liquid an asset, the easier it is to buy or sell it without causing significant fluctuations in its value.

In the cryptocurrency market, liquidity is crucial to ensure that transactions occur smoothly and without major price variations. This is where liquidity pools and liquidity providers come into play.

What are liquidity providers?

Liquidity providers are market participants who provide assets to a trading platform. They place buy and sell orders in the order book, helping to maintain the balance between supply and demand. In exchange for this service, liquidity providers receive rewards in the form of trading fees.

There are different ways to act as a liquidity provider in the market. They can be financial institutions or individuals creating their own liquidity pools.

Entities acting as liquidity providers play a fundamental role in ensuring the fluidity of transactions. These entities can include banks, brokerage firms, investment funds, and even individual traders.

On the other hand, Decentralized Exchanges (DEXs) have introduced a different way of providing liquidity, through liquidity pools. In these pools, users can provide their own assets and be rewarded with fees earned from trades conducted within the pool. Unlike centralized exchanges, DEXs operate in a decentralized manner, allowing users to directly participate in market liquidity.

These liquidity pools are essential for DEXs' operations, as they ensure there is always sufficient supply of assets to meet traders' demand, while also promoting greater autonomy and transparency in the trading process.

DEXs (Decentralized Exchanges) and liquidity pools offer advantages, but they also have their risks. They may face performance and security issues due to their decentralized nature, while liquidity pools face impermanence loss risks and vulnerabilities in smart contracts.

Considering bringing this innovation to centralized exchanges, digitra.com created its own Liquidity Provider mechanism. This novelty offers simpler and safer ways for individuals to act as liquidity providers and earn daily passive income.

Liquidity Provider Mechanism at digitra.com

At digitra.com, each cryptocurrency buy and sell trade order placed by Market Makers generates rewards for liquidity providers. Whether you're an experienced investor or just entering the crypto world, our Liquidity Provider can be an excellent opportunity for passive income.

Market Makers place orders in the order book, thus contributing to liquidity generation. They earn rewards derived from the trading fees collected by digitra.com. You can also become a liquidity provider and earn daily income by placing buy and sell orders on the platform. Orders must always be limit types, as a market order falls under the category of market taker.

If you're not familiar with the terms Market Maker and Market Taker, please read the section below. If you already know these terms, you can proceed to the next section.

What is a Market Maker and Market Taker?

In the context of the cryptocurrency market, "maker" and "taker" refer to two distinct participants in the trading process. The market maker places limit orders, predefining asset values for buying or selling. Their role is to create liquidity in the market by providing orders awaiting matching. On the other hand, the market taker accepts the orders previously established by the market maker. The taker's role is to execute market orders, fulfilling buy or sell requests based on the asset's current prices.

Understanding these roles requires understanding the differences between market orders and limit orders. Market orders are executed based on the current asset prices, while limit orders have their values predetermined by the buyer or seller. Therefore, the market maker is responsible for creating orders, contributing to the formation of the cryptocurrency order book, while the market taker uses orders to execute transactions. This distinction not only influences the trading process but also impacts the fees charged for services, highlighting the importance of these two participants in the cryptocurrency ecosystem.

Practical Understanding of digitra.com's Liquidity Provider Mechanism

Open your order: When you place a buy or sell transaction for cryptocurrency using a limit order, setting the price for the coin, you contribute to market liquidity. In the limit order, you define the desired price.

Generate rewards: Orders that generate rewards need to be opened with a limit price, meaning they must be a limit order. Additionally, they need to act as makers in the order book, meaning not all limit orders receive rewards, only those that set the price in the book. Buy and sell orders meeting these criteria generate rewards while open and when executed.

Reward distribution: When your maker order is executed, you receive the Liquidity Provider reward instantly. For orders that remain open, rewards are distributed by digitra.com once a day.

Amount of rewards: digitra.com allocates 20% of the trading fees collected on the day to these Liquidity Provider rewards, so the distributed volume depends on the brokerage's trading fee collection. Another variable affecting your earnings is the price of your open order.

Earn according to your strategy: The closer your limit order is to the currency's market value, the greater your share of the distributed rewards. This means that setting a price close to the market price results in larger rewards.

How do you earn?

Your reward will be in the currency you are trading. If your order is to buy Bitcoin, you will receive Bitcoin. If you sell Bitcoin against Real, you will receive in Reais.

Practical example

Imagine Bitcoin is trading at 300,000 reais. You decide to buy 100 reais of Bitcoin but set a limit price of 295,000 reais per unit. This means your buy order will remain open until the Bitcoin price reaches 295,000 reais.

When the daily reward distribution occurs, your open order will be considered, and you will receive a larger share of the rewards because you set price is close to the cryptocurrency's market value.

In contrast, if you placed a limit order at a price of R$ 200,000, it would likely remain open for many days due to its price distance from the market value, but it would generate considerably fewer rewards for you.

Why choose digitra.com's Liquidity Provider?

Daily passive income: Earn money while contributing to the liquidity of the cryptocurrency market.

Portfolio diversification: Accumulate a variety of cryptocurrencies listed on digitra.com, such as Bitcoin, Ethereum, Polygon, Dogecoin, and many others.

Easy and accessible: No need to activate any additional products or sign contracts. Just open your account at digitra.com and start creating your buy and sell orders.

Check out Liquidity Provider's Litepaper for more details on the product!

If you're looking for a practical and fast way to earn daily passive income, digitra.com's Liquidity Provider is the right choice for you. Click here and join the ultimate exchange and be part of this financial revolution!