We propose a new liquidity model as the foundational infrastructure for digital finance, opening the way for programmatic liquidity. Primarily meant to be executed as a smart contract, we think it represents an amazing opportunity for any type of private or permissioned ledger (either centralized or decentralized).
We believe disintermediation is a key value proposition for DeFi and are willing to remove rent-seekers from the liquidity space (CEX, App-Chains).
The current on-chain liquidity is non-competitive with on-exchange liquidity models, consequently there is just about 10% of the liquidity function truly happening on-chain, thanks mostly to hardcore ideal-minded dedicated liquidity providers. There should be much more and fortunately this is not a fatality.
We believe we have discovered the new primitive (DeFi deserves and expects) that is both competitive and expressive. This revolution will ignite the virtuous circle of on-chain liquidity (where consumers and producers finally converge to a single model), leading to a significant increase of on-chain liquidity.
Liquidity is a core market utility that enables price & risk discovery. It’s an interaction between producers and consumers.
An efficient liquidity model is one that achieves a dynamic equilibrium with minimum friction (slippage/impermanent-loss).
Please refer to the whitepaper for more information on the mathematical theory of liquidity that underpins our model.
There are currently 2 dominant liquidity models: order-books and liquidity pools.