A Beginners Guide to Trade Mining – 2021 Edition
Trade mining is a feature in the DeFi space that continues to gain in popularity. The concept combines the essence of yield farming with staking and mining in a unique way. As such, it enables users to secure passive rewards securely and in a stress-free manner.
What is Trade Mining
Trade mining systems operate as incentivization protocols for exchange users. Trade mining tokens mint every time a person conducts a transaction on a participating DEX (decentralized exchange). Like mining, these tokens are minted into existence at the time of your transaction. However, these mintings are the only time these tokens are newly issued.
However, unlike mining, you don’t need to compete with other nodes to receive your rewards. You also don’t need to invest in expensive mining rigs. Additionally, your actions are not used to secure or validate the blockchain. Primarily, trade mining provides an incentive to use platforms that provide this service.
This incentive benefits both the platform and the users in deeper liquidity and more trading volume. Additionally, many platforms enable users to take their trade mining tokens and stake them to earn even more rewards. In this way, regular users can open up new revenue streams without adding risk.
There is a lot of benefits trade mining brings to the market. For one, it helps traders increase their profits. The more you trade mine, the more rewards you secure. For day traders that sometimes conduct over 100 trades daily, these rewards can add up to be substantial.
These tokens can also be sued to offset gas prices. Gas prices have hit record highs. These fees rose sharply due to the added network congestion introduced by the sudden increase in DeFi platforms on the Ethereum network. Trade mining users can reduce these fees by using their rewards tokens to pay for fees and services. You can also trade into other cryptocurrencies or stablecoins to improve your ROI.
Many trade mining protocols such as SushiSwap operate as open-source protocols. This designation enables developers to integrate these services into their Dapps in a seamless manner. Specifically, third parties can provide farming reward distribution to their customer and use a trade mining smart contract as a farming/AMM pair pool host service.
Trade mining enables anyone to earn rewards for simply trading. However, unlike trading, your rewards aren’t based on your ability to predict the market’s movements. Instead, your rewards are based on volume and activity. Best of all, there are no extra steps required to secure these rewards. Instead, they automatically deposit in your connected wallet.
How Does Trade Mining Work
Trade mining works by allocating a special token to users for each transaction they make on a specific platform. Most of these systems act as just one component of a complete DeFi ecosystem. These tokens are designed to integrate into other services and platforms such as staking, yield farming, and more.
Notably, most platforms payout rewards for staked trade mining tokens in their native token. However, these protocols are still very new to the market. As such, you can expect to see some platforms begin to offer rewards in major cryptos like ETH or BNB in the coming months.
Platforms that Offer Trade Mining
There are only a few platforms that offer trade mining services at this time. SushiSwap is the largest and most popular of these exchanges. SushiSwap provides rewards in the form of S Tokens to users conducting trade mining activities. These tokens can then be staked or farmed.
SushiSwap users deposit their S Token in the trade mining pools to further mine SAKE tokens as a reward. Notably, each pool has a corresponding S Token. Specifically, there is the SAKE-ETH S Token for the SAKE-ETH pool. In this way, SushiSwap users can harvest SAKE through Yield Farming and Trade Mining at the same time.
History of Trade Mining
The first platform to introduce trade mining to the market was the Chinese-based exchange Fcoin. Fcoin sent shockwaves through the market when they introduced the concept in May of this year. Since then, multiple platforms have sought out to duplicate and improve on the feature. The main difference between SushiSwap’s offering and Fcoin is that the latter doesn’t offer yield farming options for these rewards.
Risks of Trade Mining
As with all new protocols, there are some risks to be made aware of. For one, these rewards tokens are issued based on transactions volume. Consequently, some inflationary concerns emerge in the coming months as more networks offer trade mining features.
Also, you have the normal risks associated with DeFi platforms. It would be best if you were vigilant and DYOR (Do
Your Own Research) to avoid scams. Always double-check smart contract addresses and if you are ever completely lost, reach out to the community. Tons of crypto enthusiasts can let you know if something seems off about a particular platform. The main thing is to always stick to reputable platforms.
The biggest risk to users is simply making mistakes. If you’re new to the DeFi sector, everything can seem confusing. It would help if you remembered that there are no refunds on the blockchain. That means when you need to be 100% sure when you conduct any transactions from trading to staking.
Trade Mining – A New Standard
The introduction of trade mining to the DEX sector could have a resounding effect on all platforms moving forward. There is no doubt that these systems help to offset high gas prices and fees. Just these factors are enough to entice traders to check out any platforms offering these services. As a result, you can expect to see many more DEXs introduce trade mining features in the coming weeks as the benefits are too great to ignore.