When used to using the traditional banking system, learning how to pay and get paid in crypto might sound daunting. While there are a lot of factors to consider, it’s really a lot more simple than one might imagine.

Below we’re taking a look at the advantages of using digital currency to pay and get paid, and how to go about doing this safely and securely. 

The first proper use case of blockchain as we know it today was money. Bitcoin was designed as a decentralized digital means of transacting value at a faster and cheaper rate than traditional fiat currencies. Over a decade later and this still remains the case for digital assets. 

Cryptocurrencies like Bitcoin allow individuals to be paid quickly and simply regardless of where they are in the world. However, crypto operates in a very different way to traditional banking systems, which means you'll need to understand your way around it first. 

The Advantages of Using Crypto Payroll Services

The nature of cryptocurrencies allows crypto payroll services to offer several benefits for both employers and employees, particularly when the parties are located in different countries. The advantages are in part because there is no middleman concerned when using virtual currencies, which results in lower transaction fees, faster transaction speeds, and higher dependability. 

The Advantages of Digital Currencies for Businesses

Small enterprises face intense rivalry from bigger businesses in a global economy. Small companies, particularly in the tech space, may lack local expertise making foreign job markets more attractive. 

It’s often the case that those skills are available remotely, and often at a much better price, but accessing remote workers can be difficult, mostly due to the problems of sending money overseas. This can be a costly, time-consuming and unreliable process.

Some workers with the right skills simply won’t have access to the banking infrastructure or services that allow them to accept money from overseas employers.

This is where cryptocurrencies come in. You can use Bitcoin or other cryptocurrencies to access the international gig economy of digital nomads and highly-trained specialists.

Because cryptocurrency allows you to transfer funds at a significantly lower cost than traditional services, you won't have to worry about one person having to pay the costs of remittance, which can be costly when using conventional money transmission platforms. 

No matter how much money you’re sending, Bitcoin transaction fees are considerably lower than fiat currency, typically less than $1, allowing businesses to outsource small jobs or split a project into smaller parts. This can ensure that all parts of the project are given to a contractor who has the right skills and is a good fit for your firm. 

The Advantages of Digital Currency for Individuals

There are several benefits to accepting crypto payments, which might even outweigh the advantages for businesses (which, of course, makes implementing Bitcoin payroll procedures a lucrative option for organizations that need to hire remotely).

• First and foremost, getting paid in crypto is faster and more efficient than international fiat payments. Cutting out days, foreign exchange charges and hefty fees, crypto transactions are settled in a matter of minutes for a fraction of the cost. 
• Accepting crypto allows the individual to accept remote work, allowing for a greater scope of projects and companies. Working with companies with no geographical borders can present some incredible opportunities, more of which revolve around better income and more exciting projects.
• Working with cryptocurrency transactions allows for small amounts of money, whereas previously with fiat currency the charges would be too high to do so. This allows the individual to take on many small jobs across a range of businesses or interests.
• As some cryptocurrencies, like Bitcoin, provide a strong store of value, this allows users the chance to be more flexible with their funds, perhaps storing crypto assets away as savings (cryptocurrency holdings) which in time will ideally grow. Some crypto platforms, like Tap, even allow users to pay bills using their crypto balances.

The Legal Status Of Crypto Payments (and capital gains tax)

While Bitcoin transactions are completely secure, fast, and inexpensive, there is one element one will need to consider, and that is the legal status of cryptocurrencies in one’s jurisdiction.

Most nations have favorable regulations in place when it comes to receiving, sending and storing cryptocurrencies, however, it differs from country to country so it is important to check this prior to diving right in. 

On top of that, one must check the tax obligations relevant to your jurisdiction. Some countries treat crypto salaries as taxable income, while other countries treat it as capital gains tax. Check with a professional in your area should you need to.

How To Pay With Bitcoin

If you’re looking to pay employees in Bitcoin you will first need to get Bitcoin. You can acquire the cryptocurrency in one of three ways: mining, buying or receiving it as part of your business’ income. Depending on the services your company provides, it is most likely that you will need to buy Bitcoin before paying workers, which you can do conveniently and securely through Tap.

When you pay your workers with cryptocurrency payments, you will send them a dollar-equivalent amount of Bitcoin, relevant to the price of Bitcoin at the time of transfer. For example, if the price of Bitcoin is $50,000 and you owe them $2,500, you will need to send them 0.05 BTC.

Most exchanges will calculate this for you, showing the current dollar/crypto exchange rates. Tap also ensures that users receive the best price on the market at any given time through smart trade technology.

How To Get Paid In Cryptocurrency

For contractors who want to get paid in Bitcoin or other digital currencies, the approach is much the same only in reverse. However, you’ll need to consider what you want to do with the cryptocurrency you receive, and how you will store it.

Tap provides the perfect solution to both options as you can securely store your Bitcoin and other cryptocurrencies in the wallet provided, while also being able to use your crypto or fiat balance to pay fiat bank accounts and municipal bills and make other payments. 

Receiving and sending crypto is simple. All you need to do is open your Tap app, select the cryptocurrency you would like to receive and locate the relevant wallet address. Share this with your employer and the funds will be deposited directly into your account. Yes, it's really this easy.

In Conclusion

There are several advantages for businesses that pay their employees or freelancers in Bitcoin, as well as contractors who want to get paid in Bitcoin. These include fast, low-cost, and secure transactions regardless of where the parties are located, as well as access to a global market of employment and labor.

It's the perfect way to optimize operations, lower expenses, and find the best man for the job. 

If you have stayed around the cryptocurrency market long enough, then you will be familiar with the term “crypto whale”. This term usually refers to big players in the crypto space that are known to hodl and move around large amounts of any given coin, often affecting the price while they’re at it. We’ll discuss how whales are affecting the cryptocurrency market by considering the following:

Who is a Whale

In the cryptocurrency market place, the term whale is used to describe any individual or group that controls a large amount of Bitcoin or cryptocurrencies. Just like the size of the whale distinguishes it in the ocean, portfolio size of these individuals or groups sets them apart in the crypto industry.

It is estimated that roughly 40% of all the Bitcoins in existence are held by only about 1,000 people. That is some huge volume to deal with, no matter the ratio among them. Some of these whales are well known individuals and groups. Roger Ver, the Winklevoss Twins and Charlie Shrem are some of the well known individuals that control large volumes of Bitcoin. While Fortress Investment Group and Pantera Bitcoin Fund are examples of group whales.

The majority of today's whales consist of early adopters who allocated substantial funds to acquire Bitcoin and cryptocurrencies during periods of lower prices. The Winklevoss twins, for instance, directed $11 million into this venture, a fraction of their payout from a Facebook intellectual theft lawsuit involving Mark Zuckerberg. This endeavor granted them ownership of 100,000 Bitcoins, which are now valued at over $1.1 billion.

Do Whales Manipulate the Market?

Most whales are hodlers, therefore are expected to retain their holdings over an extended period of time, especially as Bitcoin seems to retain so much upside potential. However, from time to time, since the blockchain network is open and everyone can view the transactions that go on, we see huge volumes being traded. Apart from that, whether in the buying or selling direction, the trades of these whales always have an impact on the market.

Smaller traders most often seek to ride the trend on which whales are trading. Therefore, when these trades happen, the market seems to follow the whales. This is one major way how whales are affecting the cryptocurrency market. They determine the direction.

This kind of behaviour has caused some suspicion within the industry with people accusing the whales of manipulating the market. Although this behaviour is frowned upon, it isn’t technically breaking any laws. A typical scenario illustrating this is when whales initiate a massive sell-off of Bitcoin or any other crypto. Smaller traders will follow suit after the price has dropped. Afterwards, the whales buy back their crypto at a much cheaper rate, making a lot of money in the process.

However, it is also fair to realise that most of these whales are long term investors who are astute hodlers of Bitcoin and cryptocurrencies. Therefore, we cannot always accuse them of manipulating the market, even though they have the capacity to do so.

How Can You Trade Like a Whale?

What we should be concerned about is if there will come a time that these whales will want to recover their capital. Would there be a massive sell-off of Bitcoin and cryptos, and how will it impact the market? Well, the Bitcoin and cryptocurrency market is still young, and we expect the system to last for a very long time before any such thing can be anticipated.

Whether there are whales in the market is not a question. Also, whether their actions have any impact on the market has also been established. What traders like to know is the heartbeat of these major stakeholders in the industry. This could serve as a fundamental factor in determining what to expect from the markets. Real time prices and market capitalization with respect to volume are areas where we can determine which way the whales are moving.
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Emulating the trading strategies of prominent crypto whales involves understanding some of their key practices. These influential traders often possess significant resources, enabling them to execute substantial trades. To gain insights from their approach, consider the following principles:

1. Informed Decision-making: Stay well-informed about the cryptocurrency ecosystem by keeping up with reputable news sources and reliable platforms. Understanding market trends, new projects, and potential events can contribute to better decision-making.
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2. Analytical Approach: Utilize a blend of technical and fundamental analysis. Technical analysis involves studying historical price data and chart patterns, while fundamental analysis focuses on evaluating the intrinsic value and growth potential of a cryptocurrency.
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3. Risk Management: Prioritize risk management to safeguard your capital. While crypto whales can tolerate losses, individual traders should be cautious. Implement risk management techniques like setting stop-loss orders and diversifying your portfolio.
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4. Adaptability: Remain adaptable to changing market conditions. What works in a bullish market might not be effective during a bearish phase. Being open to adjusting your strategies can be beneficial.
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5. Patience and Discipline: Practice patience and discipline in your trading approach. Crypto whales often wait for favorable opportunities, and exercising restraint can prevent impulsive decisions.
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6. Network and Insights: While crypto whales might have access to insider information, you can still benefit from networking within the crypto community. Engage with knowledgeable traders and participate in discussions to gain insights.
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7. Learning from Mistakes: Mistakes are inevitable, even for crypto whales. Use your experiences as learning opportunities, and continuously improve your trading strategies.

Remember, while understanding the strategies of crypto whales can offer valuable insights, individual trading outcomes vary. The crypto market carries inherent risks, and any trading decisions should be based on careful consideration and personal risk tolerance.

While cryptocurrencies have been around for over a decade we continue to learn and observe new things in the market to this day. Over the years many trading patterns have been repeated, regulation has changed the nature of the game and of course, volatile price movements have played out.

While this sounds unpredictable and scary, it has also allowed trading analysts to observe the cyclical nature of these activities. This information allowed investors and customers to better understand the crypto market cycles, and more importantly, use them to their advantage. 

In this article, we'll show you how to not only understand the crypto market cycles but how to identify and use them to your advantage.

What are market cycles?

Reaching beyond the cryptocurrency market and across a wide range of assets, market cycles are no stranger to stocks, commodities, etc. They are regular occurrences and can be summarised as the stages in between the all-time high and the low of a market. Whether trading traditional stocks, money, or assets built on blockchain technology, market cycles are prevalent across the board.

The length of a market cycle can vary and will depend on what style of trading one is conducting (short term/long term) however they are always categorised by four main components. These phases in the cycle are categorized by the accumulation, markup, distribution, and markdown phases and will be outlined based on analysis and research below.

The four phases of a market cycle

1. Accumulation phase

This takes place when the market has reached a low and prices have flattened. While many view this as a negative stage in the market cycle, many others (particularly ones with experience in the crypto market) view it as a prime time to buy the asset. When traders accumulate the undervalued asset, this is referred to as "buying the dip" and is often a lucrative endeavour. 

These low price swings are often paired with a lot of indecision in the market as weak hands exit the market and long term traders enter it, representing a period of consolidation. This typically happens before an uptrend. The accumulation phase is over when the market sentiment moves from a negative stance to a neutral one. During this phase, a lot of money is both entering and leaving the market at the same time.

2. The markup phase

As the sentiment shifts, the market begins to climb and more stability takes shape. Typically more experienced traders will continue buying, further igniting the bullish trend, and in turn saturating the crypto's buying power. This will eventually fuel FOMO, drawing many buyers into the market and in turn pushing up the price. 

As the market greed increases and trading volumes spike, the markup phase will see high-profile investors begin to sell. This slows the price increases and causes a pullback in the market. As the accumulation phase saw a move from negative to neutral sentiments, the markup phase represents a shift from neutral to bullish to euphoria. 

3. Distribution phase

With the price reaching its peak, the mixture of sellers and buyers send the market into sideways trading. The sentiment is a combination of greed, fear and hope as some believe the market could spontaneously surge again. Typically, the distribution phase is coloured with many bullish price indicators such as head and shoulder trading patterns and double or triple tops, however, the sentiment will eventually shift to a negative space, easily triggered by bad news.

The distribution phase can take place over a short period of time, or last months on end, depending on the number of consolidations, breakouts, and pullbacks and is known to be the phase with the highest levels of volatility. The distribution phase will witness the sentiment turning negative.

4. The markdown phase

The markdown phase is the fourth and final phase in the market cycle and can be the most upsetting for inexperienced traders caught off guard. While some traders might sell at a loss, others maintain their positions looking to leverage a later phase of the next cycle.

The markdown phase sees a decline in price and is a strong indicator that a bottom is approaching. When the price reaches half of its peak value there is generally another mass sell-off, driving the downtrend further into the red. The sentiment is unequivocally negative. 

Example of a crypto market cycle

Looking at the Bitcoin network, many traders believe the cycles revolve around the halvings. Bitcoin halvings are when the miners' rewards for mining a new block are reduced by half, which takes place every 210,000 blocks (roughly every 4 years).

To date, three Bitcoin halvings have taken place, each one instigating a bull run in months to follow. The most recent halving took effect on 11 May 2020, when the BTC price was trading at $8,600. Just 7 months later the price reached $40,000 for the first time in history, setting off a string of all-time high records. To date, the highest Bitcoin price that has been reached is $68,789.63 in November 2021 but went on to lose 40% of its value over the next two months. 

Market cycles are based on the cryptocurrency's overall trading patterns and not on any exchange activity. In a perfect world, the cryptocurrency's trading patterns will reflect the four phases mentioned above in this set order, allowing a set amount of time between transitions.

With time, crypto customers will be able to identify these phases, allowing any individual to build strategies around when to open or close a position, leading to the best trade result. While there is still risk involved, understanding the data surrounding the cyclical nature of trading patterns will assist in getting the best out of a digital asset project.

Crypto supercycles

Crypto supercycles are a unique phenomenon in the blockchain industry. They involve price fluctuations across the entire crypto market, influenced by the increasing adoption of blockchain technology. This concept is more speculative than concrete, lacking well-defined parameters. It revolves around factors like the rise of institutional investors and retail adoption. Opinions vary regarding the existence of the supercycle (notably, Bitcoin's value has surged more than fivefold in a year). This market cycle stands out for its series of all-time highs, with minimal significant or lasting declines. Irrespective of the presence of a crypto supercycle, individuals can consider capitalizing on the market cycle by purchasing Bitcoin during the accumulation phase as prices gain traction after hitting a low point.

For those keen on comprehending crypto trading cycles, it's prudent to formulate a personal strategy for navigating diverse market cycles, as mentioned earlier. Analyzing market trends and patterns has the potential to be rewarding. While some individuals pursue day trading and financial services as a full-time occupation, studying the markets and their behaviors can in some instance also be a profitable part-time pursuit.

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As the Internet of Things becomes an increasingly popular topic of conversation, we are here to lay the foundations of what the concept of IoT really is. As people become familiar with blockchain and cryptocurrencies, it is only a matter of time before the IoT becomes deeply ingrained in our day to day living.  

What is the internet of things?

The Internet of Things refers to millions of physical devices that connect to the internet and collect and share data. These systems of interrelated computing devices can be as small as a pill or as large as an aeroplane and are able to communicate real-time data. This marks a prominent milestone in the evolution of the Computer Age.

This shift is possible due to a number of factors that have come into play in the last few decades, such as the decreased cost of connecting to the internet and broadband internet becoming more accessible. There is also the added advantage of more devices being built with sensors and WiFi capabilities and how these devices have reduced in cost becoming more accessible to everybody. These factors contributed to making the perfect storm for IoT to ignite. 

While the term was coined in 1999 by Kevin Ashton, the IoT era is believed to have only truly begun in 2008 when the world officially had more devices connected to the internet than people. 

An example of IoT devices

An IoT device is any natural or man-made object that can be assigned an Internet Protocol (IP) address and transfer data over a network. It can range from smart speakers like Amazon's Alexa and Google Next to a lightbulb, security camera or thermostat that are controlled by apps, from heart rate monitors to sprinklers, and everything in between. 

How does IoT work?

IoT technology is made up of physical devices that consist of networks of sensors, processors and communication hardware. These internetworking components are able to collect, send and act on the data they receive. 

The data is then analysed in the cloud through an IoT gateway or other edge device, or communicated to other related devices from where action can be executed. These processes are all automated, however, human invention can occur when setting them up, accessing data or giving the devices instructions. This technology essentially enables the remote monitoring, programming and control of specific data with minimal human intervention. 

Artificial intelligence (AI) and machine learning can also be implemented to assist in making data collecting processes easier and more dynamic.

In a practical example, an IoT device such as a thermometer will collect the data (temperature), this will then be collated and transferred through an IoT gateway or IoT hub from where the back-end system or user interface (e.g. app on a smartphone) will analyse the data and take action. 

IoT in domestic settings

Already seeing a huge advancement in home and office devices, the IoT movement on a domestic level is big and getting bigger. Home automation is fast becoming a very lucrative endeavour, with the market valued at $44.68 billion in 2020 alone. This ranges from lights to air conditioners to security systems, anything in the home that can be controlled by an app, including smart hubs connecting these devices, like TVs and refrigerators. 

IoT devices have also proven their worth among elders and people with disabilities, as they are able to provide assistive technology for sight, hearing or mobility limitations. 

IoT in industrial settings

While the smart home industry is booming, the industrial use cases are not far behind. IoT in business allows companies to automate processes and can help to monitor the performance of systems and machines in real-time, from supply chain management to logistic operations.

The market has already seen devices used to track environmental conditions (humidity, air pressure, temperature), prevalent in the designs of smart cities. They also prove their worth in the agricultural sector where farmers can use these devices to monitor the water levels of livestock or automatically order new products when the supply is about to run out. 

The future of IoT

Already over a decade into the movement, IoT is only going to get bigger. With a range of use cases that span almost every sector, it's no surprise that the projected value for the industry in 2028 is over $97 billion. Forecasts also predict that industrial and automotive equipment will present the largest opportunity for growth in the future, while smart home and wearable devices will dominate in the coming years. 

However, if the implementation of these devices is not done well this could present a new challenge to the industry. For example, if you have several smart home devices running in your home and need to log into several different apps to use them, this will hinder the growth of that sector. 

In conclusion: The IoT is the future of things

Any device falls into the category of IoT as long as it collects and shares data enabling smarter working with more control. If implemented correctly, IoT devices may well be a permanent fixture in our lives in the next decade, with analysts predicting that adoption and spending will grow exponentially in the next few years. 

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Yield farming is a method to generate more crypto with your crypto holdings. The process involves you lending your digital assets to others by means of the power of computer programs known as smart contracts.

Cryptocurrency holders have the option of leaving their assets idle in a wallet or binding them into a smart contract to assist with liquidity. Yield farming allows you to benefit and gain rewards from your cryptocurrency without spending any more of it. Sounds quite easy, right?

Well, hold on because it isn't that straightforward and we are just getting started. 

Yield farmers employ highly advanced tactics in order to improve returns.

They constantly move their cryptocurrencies among a variety of lending markets in order to optimize their returns. After a quick Google search, you would wonder why there isn't more content surrounding strategies and why these yield farmers are so tight-lipped about the greatest yield farming procedures.

Well, the answer is quite simple: the more people are informed about a strategy, the less effective it becomes. Yield farming is the lawless territory of Decentralized Finance (DeFi), where farmers compete for the opportunity to grow the highest-yield crops. 

As of November 2021, there is $269 billion in crypto assets locked in DeFi, gaining an impressive almost 27% in value compared to the previous month of October.

The DeFi yield farming rise shows that the excitement in the crypto market has extended far beyond community- and culture-based meme tokens and planted itself in the centre of the hype. What exactly does it take to be a yield farmer?

What kinds of yields can you anticipate? Where do you start If you're considering becoming a yield farmer?  Here, we'll guide you through everything you need to know.

What is Yield Farming? 

Also referred to as liquidity farming, yield farming is a method for generating profits using your cryptocurrency holdings instead of leaving them idle in an account on a crypto website. In a nutshell, it involves bidding cryptocurrency assets into platforms that offer lending and borrowing services and earning a reward for it.

Yield farming is similar to bank loans or bonds in that you must pay back the money with interest when the loan is due. Yield farming works the same way, but this time, the banks are replaced in this scenario by crypto holders like yourself in a decentralized environment. Yield farming is a form of cryptocurrency investment in which "idle cryptocurrencies" that would have otherwise been held on an exchange or hot wallet are utilized to provide liquidity in DeFi protocols in exchange for a return. 

Yield farming is not possible without liquidity pools or liquidity farming. But, what is a liquidity pool? It's basically a smart contract that contains funds. Liquidity pools are working with users called liquidity providers (LP) that add funds to liquidity pools. Find more information about liquidity pools, liquidity providers, and the automated market maker model below.

How Does Yield Farming Work?

Liquidity pools (smart contracts filled with cash) are used by yield farming platforms to offer trustless methods for crypto investors to make passive revenue by loaning out their funds or crypto using smart contracts.

Similar to how people create bonds to pay off a house and then pay the bank interest for the loan, users can tap into a decentralized loan pool to pay for the bonds.

Yield farming is a type of investment that involves the use of a liquidity provider and a liquidity pool in order to run a DeFi market. 

• A liquidity provider is a person or company who puts money into a smart contract.
• The liquidity pool is a smart contract filled with cash. 

Liquidity providers (LPs), also known as market makers, are in charge of staking funds in liquidity pools enabling sellers and purchasers to transact conveniently by executing a buyer-seller agreement utilizing smart contracts. LPs earn a reward for providing liquidity to the pool. Yield farming is based on liquidity providers and liquidity pools, which are the foundations of yield farming. These work by staking or lending crypto assets on DeFi protocols to earn incentives, interest or additional cryptocurrency. It's similar to how venture capital firms invest in high-yield equities, which is the practice of investing in equities that offer better long term results. 

Yield farmers will frequently shuffle their money between diverse protocols in search of high yields. For this reason, DeFi platforms may also use other economic incentives to entice more capital onto their platform as higher liquidity tends to attract more liquidity. The method of distribution of the rewards will be determined by the specific implementation of the protocol. By yield farming law, the liquidity providers get compensated for the amount of liquidity they contribute to the pool.

How Are Yield Farming Returns Calculated?

Estimated yield returns are calculated on an annualized model. This estimates the returns that you could expect throughout a year. The primary difference between them is that annual percentage rates (APR) don't consider compound interest, while annual percentage yield (APY) does. Compounding is the process of reinvesting current profits to achieve greater results (i.e. returns).  Most calculation models are simply estimates. It is difficult to accurately calculate returns on yield farming because it is a dynamic market and the rewards can fluctuate rapidly leading to a drop in profitability. The market is quite volatile and risky for both borrowers and lenders.

Before Getting Started, Understand The Risks Of Yield Farming

Despite the obvious potential benefits, yield farming has its challenges. Yield farming isn't easy. The most successful yield farming techniques are quite complex, recommended only to advanced users or experts who have done their research.

Here are the different risks: 

Smart contract

Smart contracts are computerized agreements that automatically implement the terms of the agreement between parties and predefined rules. Smart contracts remove intermediaries, are less expensive to operate and are a safer way to conduct transactions. However, they are vulnerable to attack vectors and bugs in the code.

Liquidation risks 

DeFi platforms, like traditional finance platforms, use customer deposits to create liquidity in their markets. However, if the collateral's value falls below the loan's price, you would be liquidated. Collateral is subject to volatility, and debt positions are vulnerable to under-collateralization in market fluctuations.

If you borrow XX collateralized by YY a rise in the value of XX would force the loan to be liquidated since the collateral YY value would be inferior to the value of the XX loan.

DeFi Rug Pulls

In most cases, rug pulls are obvious exit scams that are intended to entice investors with a well-manufactured promising project in order to attract investors. 

A crypto rug pull happens when developers create a token paired with a valuable cryptocurrency. When funds flow into the project and the price rises, developers then seize as much liquidity they can get their hands on resulting in losses for the investors left in. 

Impermanent loss

Impermanent loss happens when a liquidity provider deposits their crypto into a liquidity pool and the price changes within a few days. The amount of money lost as a result of that change is what is called an impermanent loss. This situation is counter-intuitive yet crucial for liquidity providers to comprehend.

Exercise Caution When Getting Into Yield Farming

If you have no prior knowledge of the cryptocurrency world, entering into the yield farming production may be a hazardous endeavour. You might lose everything you've put into the project. Yield farming is a fast-paced and volatile industry. If you want to venture into yield farming, make sure you don't put more money in than you can afford, there's a reason why the United Kingdom has recently implemented serious crypto regulations.

What The Future Holds For Yield Farming

We hope that after reading this article you will have a much deeper understanding of yield farming and that it answered some of your burning questions.

In summary, yield farming uses investors' funds to create liquidity in the market in exchange for returns. It has significant potential for growth, but it's not without its faults.

What else might the decentralized financial revolution have in store for us? It's difficult to anticipate what future applications may emerge based on these present components. However, trustless liquidity protocols and other DeFi technologies are driving finance, cryptoeconomics, and computer science forward.

Certainly, DeFi money markets have the ability to contribute to the development of a more open and inclusive financial system that is accessible to everyone with an Internet connection. 

Cryptocurrencies derive their value from supply and demand, with the buyers and sellers playing an enormous role in the market's liquidity, and ultimately, success. This rings true for stocks, commodities and forex markets too, essentially any asset markets with trading volumes.

Anyone participating in these markets will have been a maker or a taker at some stage, most likely, both. In this article, we're breaking down the concept of makers vs takers, exploring their vital role in the market and large quantities of these result in stronger exchanges. 

Liquidity Explained

Before we dive in, let's first cover an important concept: liquidity. Assets can sometimes be described as liquid or illiquid, this simply refers to how easily the asset can sell. Gold is a prime example of a liquid asset as anyone could easily trade it for cash without any hassle, while a glass statue of your neighbour's cat would be an illiquid asset as the chances of anyone wanting to own it are slim (except for the neighbour, maybe). 

Building on this, market liquidity indicates how liquid a market is. A liquid market means that the asset is in high demand, traders are actively looking to acquire the asset, while also having a high supply, meaning that traders are actively looking to offload the asset. An illiquid market then means that there is low supply and demand, making it difficult to buy or sell the asset for a fair price.

In a liquid market where there are many traders looking to buy and sell an asset, the sell order (ask price) tends to be in the same region as the buy order (buy price). Typically, the lowest sell order will be the same as the highest buy order, creating a tight buy-ask spread. 

Now that we've covered liquidity, it's time for makers vs takers. 

What Is The Difference Between Market Makers And Market Takers?

As mentioned above, any successful exchange requires a fair amount of makers and takers. Let's explore the difference between the two below. 

Market Makers

Exchanges typically use an order book to conduct trades. The order book will store offers to buy and sell as they come in, and execute the trades when the criteria are met, i.e. someone could create an offer that says when Bitcoin reaches $40,000, buy 4. When the BTC price reaches $40,000, the order book with automatically execute this trade. 

In this case, the person creating this buy order is known as a maker. They are essentially "making" the market by announcing their intentions ahead of time via the order book. While many retail investors are makers, the field is typically made up of big traders and high-frequency trading institutions. 

A market maker is a liquidity provider. ‍

Market Takers

Market takers are then liquidity "takers", removing liquidity from the market. Takers create market orders that indicate to the exchange that the trader wants to buy or sell at the current market price. The exchange will then automatically execute the trade using a maker's offer.

A taker is a trader filling someone else's order. Market makers create offers for the order book, making it easier for users to buy and sell, while market takers exercise this liquidity by buying the asset. 

What Are Maker-Taker Fees?

You might have heard of maker-taker fees before, this makes up a considerable amount of how exchanges generate an income (after all, exchanges are businesses that need to make money). When an exchange matches a maker and a taker, they will take a small fee for the efforts on their part. This fee will differ from exchange to exchange, and will also be dependent on how big of a trade it is. 

As makers are providing liquidity to the exchange (an enticing attribute for any trading platform) they will pay lower fees compared to a trader taking away from the platform's liquidity. Always be sure to check the fee structure and pricing on a platform before engaging in any trading activity, these will be outlined in the platform's trading policy.

How Do Trading Companies Make Money?

Cryptocurrency and blockchain technology was designed to provide a decentralized financial system that bypasses government control. However, to alleviate regulatory concerns, exchanges were established to provide a reliable and convenient means of operating within the crypto markets. These exchanges provide a secure way in which users can buy, sell and trade cryptocurrencies, and in return make money through the activities of its customers as it is a business after all.

While maker and taker fees make up a large portion of how a platform generates an income, the business also generates income through deposit and withdrawal fees, commissions made on trades and listing fees. These typically make up the cost of production and running the business.

In Conclusion

Market makers contribute to the market's liquidity by creating orders looking to be filled, while market takers fill these orders. Makers are typically rewarded for bringing liquidity to a platform with low maker fees, while takers pay higher fees when they make use of this liquidity, easily buying and selling the asset.