Public blockchain infrastructure provider Orbs offers a next-generation liquidity solution designed to encourage greater participation in defunding by separating the stablecoin pool from the cryptocurrency pool.
The liquidity protocol aims to improve links between Defi and Cefi.
As decentralized finance (defi) aggressively expands its presence in the cryptocurrency space, one of the biggest pain points is pooling liquidity.
Liquidity pools that efficiently tie up coins and tokens in smart contracts form the basis of dex (decentralized exchange) and defibrillator. Most liquidity pools require users to block an equal number of two tokens in the pool. The fees received for the pool activities are divided in proportion to the individual share. However, this model has many drawbacks.
To hold an equivalent number of two tokens (crypto and stablecoin), pools must constantly reconfigure their holdings, exposing users who lock their cryptos to slippage, price risk, and volatility. It is also difficult for users to benefit from the full portfolio without having to rebalance their assets to participate in the pools. Orbs Network has found a new solution to this problem: Single-use liquidity available through the Liquidity Nexus protocol.
This new model aims to facilitate the most efficient allocation of capital by allowing users, including participants in centralized finance (CSFIs) such as cryptocurrency exchanges, to participate in the defi by aggregating one token (one-sided) rather than two equivalent amounts (two-sided).
Protocol for the allocation of risk tolerance levels
Since the risks associated with combining crypto and stablemate users are different, the Orbs protocol optimizes rewards accordingly. Due to their nature, stablecoins retain their value and are less risky than cryptocurrencies, whose value can fluctuate greatly due to their inherent volatility.
This means the ability to monetize the full potential of their tokens and collect higher APIs to compensate for the higher risk for cryptocurrency holders. This also means that crypto owners can avoid converting chips into the right number of stalls to participate in the pool.
Centralised exchanges, which already have a sufficient number of stables, have the option of participating in pools without taking on too much risk. You don’t have to worry about price fluctuations, but the incentives are lower because the risk is less than for holders of crypto currency tokens who tie up their holdings in pools.
Overall, this new liquid agriculture model can support all stakeholders in the Defi ecosystem while inviting greater participation from the cephi community. Cefi uses existing liquidity in a form that allows for higher returns than traditionally available. Holders who pool cryptocurrencies can, in turn, achieve higher annual returns without having to constantly rebalance their portfolio.
Given these figures, Orbs’ goal of improving overall defibrillator liquidity and encouraging participation through its single-use protocol is fully achievable with its unique approach to solving one of the most critical problems impeding adoption.
Will one-sided liquidity drive you to invest in a cash pool? Let us know your comments in the section below.
Photo credit: Shutterstock, Pixabay, Wiki Commons, Orbs, Marina Rudinsky
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