Bitcoin Forum

I've read online that you make money by providing liquidity for a token on Uniswap exchange. There's also a way to do arbitrage on Uniswap by using an MEV bot. Same goes for PancakeSwap and Sushiswap. It's like earning money from staking but you're getting paid from trading fees (if I'm not mistaken). I've never tried this before, so I want to know if there's a catch before going all in.

Any suggestions and/or recommendations would be greatly appreciated. Thanks in advance. :)

Yeah, you get to earn, but the profits are usually sweet when you are in early and the APY is still high. As soon as more people join in, the percentage goes down.  The disadvantage is mostly about impermanent damage and maybe if there is a vulnerability in the smart contract or rug pulling. You know the latter also sometimes happens, so you have to be careful.

Same thing with MEV bots, they were so profitable before until it became public knowledge that they were profitable and there was a gold rush. Currently, if you are an average user who doesn't know how to create a bot, it's not worth it. If someone is selling you the bot, why are they selling you the bot instead of earning from it?

Thanks for your suggestion. I've always wanted to try arbitrage trading with an MEV bot, but I'm afraid high gas fees "kills it". It could work on other EVM chains with lower fees, though. The easiest route would be to "stake" your tokens in a liquidity pool. We'd have to consider the risk of "impermanent loss" before going all in with our hard-earned money.

I'm yet to see whenever it's more profitable to use an MEV bot, or a liquidity pool. Staking ETH at a staking pool is another option. As long as market prices don't take a "dip", there should be nothing to worry about. ;D

I know staking and LP are quite cool ways to earn good money from pools and project transactions but the way projects use people as exit liquidity these days scares me a whole lot. While trying to make more, you have to also consider your financial security so you don't fall victim.

Apart from the vulnerabilities of smart contracts, it is very important to know what projects you're creating an LP for and also keep tabs on them as you can't tell what might go wrong mid way. Nothing is guararnteed these days anymore

That's certainly true, mate. One needs to be aware of the risks involved with staking before proceeding. Usually, "meme" coins/tokens are the ones with the highest risk. I wouldn't "stake" them at a liquidity pool because you'll never know when prices will go all the way down the drain in an instant.

Stablecoins, in my opinion, are a much safer bet. They've retained their peg for a very long time. Especially those backed by real USD reserves. You can earn more money this way than a tradional bank savings account. Hopefully, Uniswap remains resilient against hacks for complete peace of mind. As long as it doesn't turn completely centralized, there should be nothing to worry about. ;)