Machine DeFi 103 | Liquidity Providing, Staking, & Tokenized Machines
peaq’s vision is to bring billions of machines on-chain. We started well, reaching 3.3 million onchain machines in just 12 months since launch. The majority of these machines will one day use peaq’s DeFi protocols alongside people, bringing real-world value to the Machine DeFi ecosystem.
If you’d like to catch up on peaq’s Machine DeFi, the financial system for the world where machines earn, trade, and invest autonomously, check out this blog here. In this article, though, it’s not as much about the big vision, but about what you can do on peaq right now.
In a not-so-distant future, robots will be working everywhere. But you don’t need to wait for that to start benefiting from smart machines. Today, you can already earn yields by providing liquidity for the Machine Economy on peaq and participating in the Machine DeFi.
Decentralized Exchanges — Earn by Enabling Swaps
A DEX (short for Decentralized Exchange) is a platform that allows users to swap tokens without a middleman, such as a centralized exchange. They are an essential component of the Web3 world, keeping it open and ensuring that anyone can participate.
Now, thanks to peaq, the DEX space is taking a major leap forward.
For the first time in Web3, decentralized exchanges, such as MachineX, allow both machines and humans to swap tokens and earn yield by providing liquidity.
This is exciting not only because machines and humans will be transacting on the same platform, but also because we can now benefit from the value those machines bring to the peaq ecosystem. Even at this point, with the Machine Economy in its nascency, the DEX on peaq lists tokens that are linked with real-world fleets of machines — sensors, routers, etc. — creating real-world value.
How can you benefit from it? Well, joining the apps whose tokens are listed on peaq is one thing, but there is another opportunity too — providing liquidity.
It’s very simple. On a Decentralized Exchange like MachineX, people, machines, and AIs can trade tokens of real-world apps (DePINs) on peaq. However, for them to trade these tokens, someone has to provide the liquidity for the trading pairs. For example, to run swaps for PEAQ/USDT, MachineX relies on liquidity providers (LPs) who deposit their tokens into the PEAQ/USDT liquidity pool; when making a USDT to PEAQ swap, a user adds some USDT to that pool and takes out some PEAQ. To reward LPs, a part of the fees generated by each pool is shared between those who provided liquidity for it.
Anyone can provide liquidity on DEXs such as MachineX — it’s an open and transparent platform.
Here’s how to get started as a liquidity provider on MachineX:
- Get some PEAQ tokens in your wallet. Your best starting place for that is peaq app.
- Pick the pair(s) you want to provide the liquidity for. Bear in mind that to join the pool for any token pair, you need to provide an equal (in value) amount of both tokens, not just one. For instance, if you want to provide liquidity on the PEAQ/USDT pair on MachineX, you will need half of your position in PEAQ and the other half in USDT, in equal value.
- Understand AMMs and price ranges: Like most Decentralized Exchanges, MachineX works as an AMM — Automated Market Maker. An AMM uses pools of tokens, supplied by liquidity providers like you. Traders swap tokens against this pool, and the prices are automatically determined by the amount of each token in the pool.
When you provide liquidity in a pool, you will be asked to select a “price range.” This is also called concentrated liquidity, and you are telling the system to use the liquidity you provided and collect fees from traders when prices are between X and Y.
You will need to decide between a narrow range and a wide range:- Narrow range: You select a range that is near the current price. This earns more fees because the liquidity you provided is concentrated where traders currently buy and sell. However, there’s a risk of the price moving out of range and you stop earning fees
- Wide range: You select a wide price range. You will earn fewer fees because your liquidity is spread thin across a wide range, but there’s less risk that the price will get out of range, meaning you continue to earn fees even if the market is volatile.
Also, you have to be wary that by being a liquidity provider, you are exposed to something called “impermanent loss”. In simple terms, if the price of one of the tokens you provide changes significantly compared to the other (for example, PEAQ in relation to USDT), you might end up with less than if you had simply held the tokens in your wallet. Usually, the share of fees generated compensates for this “impermanent loss”, but make sure to keep an eye on your positions, crunch the numbers, and adjust accordingly.
As a user of MachineX, you can, of course, also use the exchange for near instant swaps, for example, swapping USDT for PEAQ in seconds, with extremely low fees. In most cases, the fees are negligible (fractions of a cent).
Stake Your PEAQ for Extra Rewards
If you prefer a very low-risk “set and forget” approach, staking is a great option. By staking, you delegate your PEAQ tokens to a peaq validator node and help secure the network in exchange for a yield that typically ranges from 3% to 6%, depending on the node’s commission. Bear in mind that unlocking the staked tokens takes two weeks.
There are two ways you can stake your PEAQ: Native staking via peaq app and liquid staking on Parasail. You can read everything about it in this article.
Get Early Access to Tokenized Machines on peaq
Machine tokenization is one of the core pillars of the Machine Economy and an industry peaq is pioneering and spearheading. Tokenized machines, or Machine RWAs (real-world assets), can represent a multi-trillion-dollar market, which obviously makes for a stellar opportunity.
peaq powers this market by bringing the machines onchain, allowing individuals to earn a share of the revenue these machines generate by simply holding their tokens.
Machine tokenization allows individuals — rather than large corporations — to hold fractional shares of revenue-generating machines and infrastructure. This is rather different from the highly speculative nature of crypto, where most tokens are not backed by anything. Tokenized machines generate real-world yield that comes from actual economic activity.
The tokenized robots use the peaq SDK and have a Universal Machine ID, and the yields are distributed to token holders automatically. The world’s first tokenized machine is already up and running on peaq — it’s a tokenized robofarm in Hong Kong, which allows token holders to earn from the sales of fresh produce, real lettuce, cabbage, and spinach.
New tokenized machine projects will come online soon, and the best way to keep an eye on them — and get early access — is by visiting the peaq app.
Access Discounted Tokens with Vested Emission Offerings (VEOs)
A VEO is quite a new word even for those who’ve been around the Web3 space for a while — so no worries if it made you scratch your head. VEO stands for Vested Emission Offering; in a VEO vested — in other words, gradually released — tokens are sold at a discount. The gradual unlock over time prevents selling pressure, dumping, and arbitrage.
This is great for long-term holders as they can benefit from lower prices. The PEAQ VEOs have another added benefit — they boost the ecosystem by deploying liquidity on MachineX. In this model, the participating early investors commit to have a percentage of their proceeds channeled directly into MachineX liquidity pools, creating a positive feedback loop that you can learn more about here.
Right now, there are no active PEAQ VEOs live, but you can always check in on Lucid Labs to see if there are any vested PEAQ tokens to get. It’s a unique way to join at a lower cost while actively contributing to the long-term sustainable growth of the network.
Join the Machine Economy
peaq’s Machine DeFi ecosystem is all about bringing real-world machines and robots into DeFi, a space that has been highly speculative until now. It’s a vision of a world where automation works for everyone and every human is a stakeholder in a global and decentralized economy — and a lot of that begins with Machine DeFi.
If you are new to peaq, check this article on how to set up a peaq wallet, and this article on how to use the peaq app. You can also head directly to the peaq app and start using it today. It takes just a few seconds to join the future of DeFi — we counted.
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