Liquidity Providers

There will be two types of Liquidity Providers for all Dexodus traders.

User Driven Liquidity

• Users can submit liquidity to serve as the counterparty to all traders.

  • It is recommended that for the first 6 months post-launch, Dexodus should REQUIRE all users who wish to trade to have some amount of collateral submitted to the net Liquidity. This will ensure that users have some kind of hedging mechanic in place in the event they lose, and will doubly ensure that AMM will always have some money added every time a trader opens up a position. Effectively, the Trader is partially trading against themselves, but this drastically reduces the risk of bad debt.

Protocol Owned Liquidity (POL)

• This is held in a DXG-USDC pool that the protocol owns. The primary purpose for this is to serve as a backstop of last resort in the event a lot of traders begin closing winning positions, and risking Dexodus to incur bad debt against other traders.

  • As defined above, the POL should grow fairly steadily as Dexodus undergoes consistent usage from a combination of Maker/Taker and Funding fees.

  • When traders begin closing winning positions, the POL needs to burn DXG at some rate (capped to the total DXG in the POL - ie. 1% of POL’s DXG maximum in a single burn) and use the USDC that is extracted from the POL to supplement the AMM that is losing to the traders themselves.