Part 3/7:
However, one of the most profitable avenues is through decentralized exchanges (DEXs) like Uniswap. Here, users can act as liquidity providers by supplying assets that facilitate trading. Each time a trade occurs, liquidity providers receive a share of the transaction fees proportionate to their contribution to the liquidity pool.
The Power of Providing Liquidity
When you provide liquidity to a DEX, you earn fees that offer significantly higher annual percentage rates (APRs) than traditional methods. While the liquidity pool fees can vary, savvy investors utilizing concentrated liquidity can achieve returns between 50% to 150% APRs, depending on the risk taken.