Behind the Token: How Creators Generate Revenue on DEXs
Decentralised exchanges (DEXs) have revolutionised the crypto market, offering token creators a seamless platform to launch and trade their assets. While these platforms empower users with control and transparency, they also provide token creators opportunities to profit significantly.
Token creators use various mechanisms to generate revenue on DEXs, from providing liquidity to trading strategies. But how exactly do they turn a token idea into a profitable venture? Let’s explore the strategies that make this possible.
The Role of Liquidity Pools in Revenue Generation
Liquidity pools play a central role in decentralised exchanges. Imagine a creator launching Token A and pairing it with Token B in a liquidity pool. Whenever users swap between Token A and Token B, the creator earns a share of the transaction fees proportional to their liquidity contribution. For example, if the pool has $1000 worth of liquidity and the creator contributes $500, they receive 50% of the trading fees generated.
Additionally, by strategically adding or reducing liquidity, the creator can influence the market dynamics. For instance, during a new product launch announcement tied to Token A, the creator increases liquidity to stabilise the price and attract more participants. This consistent activity boosts their fee earnings and strengthens the perceived value. If you want to know more about liquidity on DEXs, we recommend reading one of our articles here to discover who adds it and what the point is.
Strategic Tokenomics to Drive Demand
Tokenomics is critical for sustaining demand. Here is why: the creators of Token A can design mechanisms that align with the blockchain’s transparent and compliance-focused principles. For example, the creator of Token A could implement a reward staking mechanism. Holders who stake Token A now can earn additional rewards, encouraging long-term holding and reducing selling pressure.
This staking system creates a feedback loop: the more holders stake, the scarcer Token A becomes in circulation, potentially driving up its market value. Another example is utility-based demand. Suppose Token A offers governance rights on a dApp within the blockchain’s ecosystem. Users holding a certain amount of Token A gain voting privileges over key project decisions. This added functionality increases demand, as users see the token as more than a speculative asset.
Market Dynamics and Speculative Trading
Some creators actively engage in speculative strategies on DEXs, benefiting from the market’s natural volatility while staying within ethical boundaries. For example, the creator of Token A might hold 20% of its total supply. Instead of dumping large portions at once, which could destabilise the market, they strategically sell small amounts during periods of heightened interest.
A more advanced strategy could involve liquidity incentives. The creator offers rewards (in Token A or Token B) to users who add liquidity to the Token A-Token B pool. This increases liquidity, reduces price volatility, and fosters a more robust trading environment, indirectly benefiting the creator’s long-term earnings.
Conclusion
We’ve explored some of the most common and effective ways token creators can generate revenue. Beyond these, opportunities like launchpad partnerships or ecosystem incentives also exist. If you’re considering creating your token, we’ve already discussed why Concordium may be the best option. Start building your future on a blockchain designed for innovation and trust.
About Concordex
Concordex is a cutting-edge Decentralised Exchange (DEX) that operates on the Concordium Blockchain. Renowned for emphasising institutional-grade security, transparency, and user-centric design, Concordex offers various services, including staking, swapping, and perpetual trading. With a mission to bridge the divide between traditional finance and decentralised systems, it offers users an unparalleled trading environment.
