Orbs, a public blockchain infrastructure provider, is offering a next-generation liquidity solution that aims to encourage more defi participation by separating the stablecoin pool from the cryptocurrency pool.
The liquidity Nexus agreement aims to create a better connection between Defi and Cefi
As decentralized finance (defi) actively expands its footprint in the cryptocurrency field, one of the most significant pains that arises is liquidity pooling.
The liquidity pool effectively locks the coins and tokens in the smart contract, providing a basis for dex (decentralized transaction) and defi operations. Most liquidity pools require users to lock an equal amount of two tokens in the pool. The rewards obtained from pool activities are distributed in proportion to the individual’s bet. However, this model will produce many inefficiencies.
In order to maintain an equal number of two tokens (cryptocurrency and stablecoin), the pool must constantly re-adjust its holdings so that users who lock its cryptocurrency face slippage, price risk, and volatility risks. In addition, this makes it difficult for users to utilize their entire portfolio without having to rebalance holdings to join the collection. Orbs Network provides “one-sided liquidity” through its Liquidity Nexus protocol, thereby providing a novel solution to this problem.
This new model is designed to allow users (including central financial (cefi) participants such as cryptocurrency exchanges) to participate in defi by consolidating only one token (one-sided) instead of two equal tokens (double) , Thereby promoting the most efficient capital allocation possible. -side).
Level reward agreement based on risk tolerance
Since users take different risks when merging cryptocurrencies or stablecoins, the Orbs protocol will optimize rewards accordingly. Compared with cryptocurrencies whose value may fluctuate widely due to inherent volatility, stablecoins are essentially expected to maintain their value and reduce risks.
This means an opportunity to monetize the full potential of its tokens and collect higher APY to compensate cryptocurrency holders for higher risks. In addition, this means that cryptocurrency holders can avoid converting tokens into an equivalent amount of stablecoins to participate in sharing.
Centralized exchanges that already have a large number of stablecoins can join the pool of funds without taking too much risk. They don’t need to worry about price fluctuations, but because the risk is low, the scale of incentives is smaller than the risk that crypto token holders will take by locking their holders in the pool.
In summary, this new mobile farming model can provide support for all stakeholders in the defi ecosystem, and it can also attract more participation from the cefi community. cefi benefits from its existing liquidity, and its format can bring higher returns than traditional methods. Through expansion, the holders can generate higher APY by pooling cryptocurrencies without the need for continuous portfolio rebalancing.
With these features, Orbs’ goal of improving overall liquidation liquidity and promoting participation through its unilateral agreement is almost achievable, thanks to its unique approach to solving one of the most critical issues that hinder adoption.
Will one-sided liquidity attract you to try liquidity pool investment? Let us know in the comments section below.
Picture Credits: Shutterstock, Pixabay, Wiki Commons, Orbs, Marina Rudinsky
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