So You Want to Be a Market Maker?
You have your Wallet ready. Staking is safe (see Liquid Staking). Yield Farming is where the real action happens.
In traditional finance, banks are the market makers. In DeFi, you are. By providing liquidity to a Decentralized Exchange (DEX) like Uniswap, you earn trading fees every time someone swaps tokens.
Step 1: Choose Your Venue
On Monad, Uniswap is the gold standard for liquidity provision. Its "Concentrated Liquidity" (V3) model allows you to target specific price ranges, maximizing your fee efficiency compared to older models.
Step 2: The Strategy (MON / USDC)
Let's say you have $1,000 to invest. Instead of holding just MON, you split it:
- $500 in MON
- $500 in USDC (Stablecoin)
You deposit this pair into a Liquidity Pool (LP). Now, whenever a user swaps MON for USDC (or vice versa), they pay a small fee (e.g., 0.3%). That fee goes to you, proportional to your share of the pool.
The Risk: Impermanent Loss (IL)
It sounds perfect, but there's a catch.
If the price of MON skyrockets, the pool automatically sells your MON for USDC to keep the ratio balanced. You end up with more USDC and less MON than you started with.
- If you just held MON: You'd have more portfolio value.
- If you farmed: You have slightly less value (Impermanent Loss), but you gained trading fees.
Rule of Thumb: Yield Farming is best when you expect prices to trade sideways or rise slowly, not during violent pumps.
Advanced: Active Management
With Uniswap V3 on Monad, you can choose where to provide liquidity.
- Narrow Range: Higher risk, massive fees if price stays inside.
- Wide Range: Lower risk, steady passive income ("Set and Forget").
Start small. Provide liquidity for stable pairs (like USDC/USDT) to learn the ropes before exposing yourself to volatile assets.
Next Up: Privacy Yield - How Lambda combines earning with ZK privacy.
