What is Liquidity Pool?

Liquidity refers to the readily swappable or staked assets, available within the blockchain. To enhance integration with various services on the blockchain, KRWO staked on liquidity pools such as KLAY-KRWO and KRWO-USDT. As more users participate, it is expected that additional liquidity and diverse liquidity pools will be established, which will enable more integrations with a variety of Web3 services.

Importance of Liquidity Provision

Liquidity provision plays a critical role in decentralized exchanges (DEXs). Especially for stablecoins, large liquidity pools help reduce price volatility and minimize price discrepancies in the market. Stablecoins like KRWO are pegged to the value of the Korean Won, meaning the value inconsistency between KRWO and KRW could make it appear unstable or untrustworthy. Therefore, providing ample liquidity is crucial to mitigating these risks and minimizing price differences between KRW and KRWO.

Arbitrage and Stability

As liquidity pools grow, arbitrage opportunities become more prevalent, helping to stabilize the value of stablecoins. Arbitrage traders exploit price differences between various DEXs, facilitating the convergence of KRWO’s market price to its pegged value in Korean Won. In this way, greater liquidity leads to reduced price volatility, stabilizing KRWO’s value to align closely with that of the fiat currency, Korean Won.

Rewards for Liquid Providers

One key feature of DEXs is that anyone can participate in providing liquidity. Contributors who acquire KRWO through the GimSwap platform and supply liquidity to various DEXs receive rewards in the form of trading fees, providing them with a sustainable source of income. Liquidity providers enhance the overall trust and security of the ecosystem.