In the world of decentralized finance (DeFi), liquidity is at the core of exchange operations, and the emergence of CETUS tokens has brought new opportunities to liquidity providers (LPs). The core innovation of Cetus lies in its concept of "centralized liquidity", which not only improves the efficiency of liquidity use, but also provides users with more flexible operation options. This article will explore in depth the characteristics of CETUS tokens and how it changes the rules of the game for liquidity provision.
The concept of centralized liquidity
Traditional automated market maker (AMM) protocols usually distribute liquidity evenly across the entire price curve, which means that within the price range (0, ∞), liquidity is random and cannot be effectively utilized. Such a design results in a lot of liquidity not being fully utilized, resulting in a waste of resources. For example, in the trading of stablecoin pairs, the actual used liquidity of most liquidity pools is less than 1% of the total liquidity. This phenomenon prevents liquidity providers from obtaining the transaction fees they deserve.
Cetus allows liquidity providers to add liquidity within a customized price range by centralizing liquidity. This means that LPs can effectively concentrate liquidity within the range based on the most active price range for a specific trading pair. For example, LPs can choose to add all their liquidity to the price range (0.995, 1.005) of the stablecoin trading pool. In this way, liquidity providers can not only improve liquidity efficiency, but also obtain more transaction fees from it.
Liquidity Positions and Active Liquidity
In the centralized liquidity model, liquidity providers are able to set a limited price range based on market fluctuations. When the market price is outside this range, the liquidity of the position will no longer be active and transaction fees will be suspended. This design allows liquidity providers to flexibly adjust their liquidity configuration in the market trend.
For example, when the price of a trading pair fluctuates in one direction, the liquidity provider will receive more of one token, which means an increase in demand. When the price re-enters the range it has set, liquidity will become active again and transaction fees will begin to be generated. This flexibility allows liquidity providers to adjust their liquidity positions at any time based on market dynamics to obtain the maximum benefit.
Price ticks: refined management of liquidity
In CETUS's centralized liquidity protocol, price changes are discrete rather than continuous. This means that the price of a liquidity position is divided by multiple ticks, and the price change between each tick is 0.01% (i.e. 1 basis point). When a liquidity position is opened, the liquidity provider needs to set an upper and lower price tick.
As new transactions are executed, the price will continue to change, and the smart contract will consume all available liquidity within the current quote range until the next price quote is reached. When the price reaches the new quote, the pool contract will automatically switch to the new quote. Such a design not only improves the efficiency of transactions, but also ensures flexible adjustment of liquidity.
Why choose CETUS tokens?
The launch of CETUS tokens is not only an innovation in liquidity management, but also an upgrade to the entire DeFi ecosystem. By centralizing liquidity, liquidity providers can use their capital more effectively and obtain higher returns. This model not only reduces resource waste, but also makes transactions more efficient, bringing users a better trading experience.
Cetus's design concept not only takes into account the needs of liquidity providers, but also fully considers the dynamic changes of the market, allowing users to flexibly adjust strategies according to market trends. All of this makes CETUS tokens an indispensable part of the future DeFi field.
Conclusion
The centralized liquidity model of CETUS token is undoubtedly an important innovation in decentralized exchanges. It not only improves the efficiency of liquidity use, but also brings more profit opportunities to liquidity providers. With the continuous development of the DeFi ecosystem, Cetus will play an increasingly important role in the future financial market.
Whether for novices or experienced liquidity providers, Cetus provides a platform worthy of attention. In the future, as more users participate, the influence of CETUS tokens will surely expand further and become a leader in the field of decentralized finance.