In this article, we unveil the mechanics of a platform for single-sided multichain liquidity provision. We call it CandyShop.
As announced in the “Graviton ecosystem proposal”, Graviton is aiming to expand into a range of multichain liquidity-centered solutions. When designing systems that would complement the line of products based around Graviton, we mainly concentrate on simplifying liquidity provision in terms of LP and trading experience. A product envisioned in the CandyShop concept would allow users to buy LP tokens “like candies”, where several simple actions are sufficient to start enjoying the sweet compounding yield.
Decentralized exchanges based on the AMM (Automated Market Making) model have secured a central position in DeFi and proven their usefulness. In order for decentralized trading markets to maintain their efficiency, it is necessary to somehow motivate users to supply liquidity into pools: this is usually solved by farming tokens. However, most of the time supplying tokens as LP (liquidity provider) brings a risk of impermanent loss: when one of the two assets in a pool grows significantly in value, it is instantly bought by arbitrage bots. The liquidity provider thus receives no profits from the increase of asset price, which could have been realized otherwise. A system like CandyShop can solve this issue, and more.