ideas://uniswap
The thing I've been most surprised by recently is a cryptocurrency called Uniswap. It's yet another utility token built on top of Ethereum (if you don't know what Ethereum is, you should go find out immediately).
Uniswap is a smart contract token that implements constant function automated market making in a decentralized exchange. This allows regular people to become market makers. Uniswap now has over 3 billion in crypto assets locked into the protocol.
What?
So this could be a little confusing, but what Uniswap is letting people do is be the "brokerage" for regular people to trade between asset pairs. So for example buying a share of google in exchange for USD is a pair. But now instead of a few brokerages, now anyone can do it.
Imagine you want to buy some USDC (a crypto stablecoin), but you want to pay in DAI (another stablecoin). This would be another pair just like (GOOGL/USD). So you can go to a decentralized cryptocurrency exchange like Uniswap to make your trade. (And you pay a small fee on top, something like 0.3% to make your trade, just like a trading fee from a brokerage or a western union)
Now, if you want to make this trade and convert your currency, you want there to be a lot of liquidity in the markets. That makes it easy to get in and out of a position.
On the other side of that trade, there's an opportunity for a "market maker" to profit on making the trade for you if there's a large bid-ask spread. They get the 0.3% for the transaction automatically.
Now, if you're a trader, you want a service like this to exist, and you want as many market makers as possible so that the fees can be more competitive than other exchanges and you can trade quickly (e.g., more liquidity).
This means that you can take your cash and supply liquidity to a market (like USDC-DAI). Uniswap will perform trades on your behalf, and you'll collect the fees.
👏 win. 👏 win.
How does this work in practice? Essentially you can throw in as much money as you like into a currency pair (ideally a stable one), and Uniswap will allow customers to make trades on your behalf. (Beware that if the currency pair is volatile, it's possible to lose money as a market maker!)
I did this with $80 last Thursday, and I've made a couple of cents in interest!
You can actually see my uniswap liquidity here
Here are some resources if you're looking to get into it: