Lending or Liquidity Provisioning
Last updated
Last updated
By participating in the liquidity pool as a liquidity provider (LP), users receive a substantial share of the fees generated from DEX and Money Market interactions.
The Fused Trade Ledger provides a flexible framework, allowing LPs to act as:
Liquidity Providers in a Decentralized Exchange (DEX).
Lenders in a Money Market.
As market prices shift, liquidity positions naturally adjust between the following states:
Active Liquidity: Supports trades in the current price bin, earning swap fees.
Inactive Liquidity: Becomes accessible to borrowers, generating borrowing fees.
This dynamic system ensures LPs consistently earn fees regardless of market conditions or liquidity state.
Liquidity is fully concentrated in the active bin, supporting trades exclusively at the current market price.
Purpose:
Maximizes trading fees by focusing liquidity where trading activity is highest.
Liquidity is divided across bins above and below the active price, creating two distinct zones:
Above the Active Price (Ask): Base assets (e.g., NAD) are supplied.
Below the Active Price (Bid): Quote assets (e.g., USDC) are supplied.
Purpose:
Balances trading and borrowing fee opportunities.
Allows LPs to capture returns from both market movements and lending activities.
Liquidity is distributed across multiple bins, with larger amounts concentrated closer to the active price and smaller amounts allocated further away.
Purpose:
Concentrates liquidity where trading activity is highest for optimized returns.
Extends coverage to support borrowing in bins further from the active price.
Liquidity is evenly distributed across a broad range of bins, regardless of proximity to the active price.
Purpose:
Ensures stable exposure to both trading and borrowing fees across a wide price range.
Reduces the need for active management.
Liquidity is placed dynamically, either increasing or decreasing with each bin as it moves further from the active price.
Ascending DCA:
Positioned Above the Active Price: Base assets (e.g., NAD) are added.
As the price rises, the base asset is gradually sold for the quote asset (e.g., USDC), gradual capturing gains.
Descending DCA:
Positioned Below the Active Price: Quote assets (e.g., USDC) are added.
As the price falls, the quote asset is gradually converted to the base asset (e.g., NAD), gradual accumulation of assets.
