Liquidity Protocol
Last updated
Last updated
The Liquidity Protocol deploys and issues Liquidity Tokens (lpTokens), a programmable asset class with built-in liquidity. Unlike most tokens, Liquidity controls its own market making operations and can maintain a unique liquidity structure that helps facilitate positive price development. Liquidity's automated tokenomics system and a novel liquidity accounting strategy provides lpTokens with a unique set of features, such as:
A guaranteed floor price
A dynamic liquidity profile
Native liquidation-free 0% interest and borrowing
Liquidation-free leverage
After launching a token, teams face the challenge of distributing these tokens to the public market. Teams often rely on market makers to provide liquidity and help facilitate smoother price discovery.
To fund this endeavor, teams must provide market makers with a significant portion of the supply, giving them substantial influence over the token’s supply and demand. This is problematic because market makers are profit-driven entities with operational costs. They have no obligation to support the token price and will engage in profitable trading strategies that oppose the interests of the markets they serve.
Liquidity was created in direct response to the exploitative practices that market participants are forced to endure. Liquidity aims to establish markets where transparency and fairness are hard requirements, and built-in at the technological level. The goal is to change the underlying mechanisms and align market participants towards shared, long-term value creation.
Liquidity leverages Raydium concentrated liquidity to create unique market dynamics for its tokens. At launch, the system deploys the majority of the token supply into the liquidity pool, eliminating the need for independent market makers to provide liquidity. This ensures that tokens are always available for purchase, and allows for continuous price discovery. With Liquidity, market making profits are reinvested to support a higher floor price over time, benefiting all token holders rather than being extracted by external parties. The system also uses it to rebalance liquidity, improving market stability and efficiency.
