Hello everyone!
In this article, we will tell you about the new liquidity provision model and why liquidity providers at Tsunami will receive one of the biggest rewards among the entire Waves ecosystem.
Enjoy reading!
For three weeks, our team has been working with the community to test the second version of the Tsunami Exchange protocol. We are almost ready to launch the upgraded product, and the first and main step on the way to success is liquidity provision.
What is liquidity provision?
The old Tsunami 1.0 protocol model worked without liquidity providers because traders provided liquidity to each other. Simply put, trader A could only earn if trader B lost. This model had many disadvantages, such as low liquidity and high price impact slippage, because the only way to change the price in the old model was to make trades.
Tsunami 2.0 will use a different model which assumes liquidity providers. A more efficient protocol will provide high liquidity combined with low price slippage and will provide the motivation for users to trade according to price oracles, as well as offering attractive terms to provide liquidity.
Liquidity providers income
Liquidity provision provides a healthy mechanism for the exchange, and as a necessary link in building an efficient economy, liquidity providers will be rewarded with high profits. They assume the risk of using invested funds to pay positive P&L to traders, but the Tsunami 2.0 protocol fully compensates for this risk by paying the providers most of the protocol fees.
How much profit does the liquidity provider earn?
💰 70% of the amount collected from trading fees paid by traders;
💎 100% of the amount of negative P&L collected;📈 50% of user liquidation penalties;🎁 25% of the trading rewards pool in TSN tokens.
With a daily trading volume of $1,000,000, which we achieved on the first version of the protocol, and a liquidity pool of $400,000, the liquidity providers would share 70% of all fees paid by traders daily, which is about $3,000 or 270% APR. Sounds profitable, doesn't it?
In what tokens can you provide liquidity?
As you remember, earlier we announced the migration of Tsunami to USDT token that PepeTeam is working on. And we are sticking to our plans, working hard to open a core set of markets paired with USDT. However, while the new USDT is under development, to support the Waves ecosystem we have decided to launch liquidity provision in XTN [USDN], an existing ecosystem token.
Along with the main trading pairs with USDT, we will launch several assets in isolated markets with XTN, where the USDN exchange rate will be valued at market value rather than being equated to $1. The isolated XTN and USDT markets will not affect each other, i.e. open orders in XTN pairs will not change token prices in USDT pairs.
Once PepeTeam's USDT token development is complete, we will implement liquidity provision in USDT, which will allow providers earn income in USDT accordingly.
Thus, the initial liquidity provision will be in XTN token, and the availability of isolated trading pairs will add useful applicability to XTN.
How and where can liquidity be provided?
Tsunami 2.0 will use a special vault, Omni-Vault, to securely store liquidity. This is a secure smart contract that will receive external liquidity from providers, collateral from all open positions, paid fees, negative P&L and liquidation penalties of user positions. From the Vault will in turn be paid closed positions in the amount of collateral and positive P&L.
In order to liquidity provision and start the new protocol engine, you just need to go to the staking page and deposit any amount of XTN, starting from 1. From the launch of Tsunami 2.0, which is scheduled for next week, you will start earning your first passive income!
Stay tuned and become the first liquidity providers in the upcoming Tsunami 2.0! Thanks for reading! Your Tsunami Team 🌊