How DEFI’s have money to run a Decentralized Bank?

In DeFi the money is largely provided by strangers on the internet. That’s why the startups behind these decentralized banking applications come up with clever ways to attract HODLers with idle assets.

In some types of products, the product experience gets much better if you have liquidity. Instead of borrowing from debt investors, they borrow from users.

Let’s take Uniswap as an example. Uniswap is an “automated market maker,” or AMM (another DeFi term). This means Uniswap is a robot on the internet that is always willing to buy and it’s also always willing to sell any cryptocurrency for which it has a market.

On Uniswap, there is at least one market pair for almost any token on Ethereum. Behind the scenes, this means Uniswap can make it look like it is making a direct trade for any two tokens, which makes it easy for users, but it’s all built around pools of two tokens. And all these market pairs work better with bigger pools.

In the next article lets talk about ‘Liquidity Pool’. Click here to go: https://blog.brozbot.com/2020/09/17/what-is-a-liquidity-pool/