Mitosis — Rethinking Liquidity for a New Era in DeFi
November 26th, 2024

Liquidity is the lifeblood of decentralized finance (DeFi). Without it, protocols falter, markets stagnate, and growth slows. Yet, the current approach to liquidity in DeFi is deeply flawed. Private negotiations, uneven distribution, and inefficiencies dominate the system, leaving both liquidity providers (LPs) and protocols struggling to find balance.

Enter Mitosis, a transformative approach that shifts liquidity management from individual interests to collective benefit. Through its innovative Ecosystem-Owned Liquidity (EOL) model and the Mitosis L1 infrastructure, this project is redefining how liquidity is sourced, optimized, and governed.

The Problem: DeFi’s Liquidity Crisis

The existing liquidity landscape is broken. Today, most DeFi protocols negotiate with a small group of private liquidity providers. These deals are often opaque, leaving no room for transparency or fair competition. For protocols, this creates instability — liquidity is here today, gone tomorrow, depending on private interests.

Meanwhile, liquidity providers face their own set of challenges. They lock their assets into single protocols or chains, limiting their ability to earn across ecosystems. These fragmented arrangements prioritize short-term gains, often at the expense of collective growth and sustainability.

Mitosis: A Collective Solution

Mitosis offers a radical departure from the traditional approach. Instead of viewing liquidity as an isolated resource tied to individual protocols, Mitosis treats it as a shared, ecosystem-wide asset.

Ecosystem-Owned Liquidity (EOL): A Shared Model for Growth

At the heart of Mitosis is EOL, a revolutionary liquidity collective. Here’s how it works:

  • LPs deposit their assets into Mitosis Vaults, which are distributed across multiple chains.

  • Instead of locking liquidity into a single protocol, these deposits join a shared liquidity pool that spans the entire DeFi ecosystem.

In exchange, LPs receive miAssets, tokens that represent their share in EOL’s total liquidity. But miAssets are more than just passive tokens — they offer governance rights, allowing LPs to vote on how liquidity is allocated across chains and protocols.

This creates a transparent, community-driven process. Liquidity flows where it’s needed most, optimizing yields and ensuring stability for protocols. At the same time, LPs earn returns from a diversified portfolio of strategies, reducing their exposure to the risks of any single ecosystem.

Mitosis L1: The Infrastructure Behind EOL

Supporting this collective liquidity model is the Mitosis L1 chain, a purpose-built infrastructure secured by Ethereum through EigenLayer. The chain acts as the backbone for EOL, enabling cross-chain liquidity management and governance.

When LPs deposit assets like ETH or USDC into Mitosis Vaults, they receive 1:1 representative tokens on the Mitosis chain. These tokens can then be converted into miAssets, unlocking access to yields and governance. For example, depositing ETH generates miETH, a yield-bearing token that reflects the collective performance of ETH liquidity strategies across multiple chains.

Why EOL Changes the Game

What sets EOL apart is its collaborative nature. Unlike the status quo, where protocols and liquidity providers operate in silos, EOL creates a unified ecosystem. Here’s why this matters:

  • Protocols gain access to stable, predictable liquidity, eliminating the need for private negotiations.

  • Liquidity Providers earn yields that are diversified across chains, reducing risks and maximizing returns.

The allocation of liquidity is determined by miAsset holders, who vote on strategies during periodic Gauge votes. This ensures that liquidity is directed where it delivers the most value, based on collective decision-making rather than private deals.

A New Class of Assets: miAssets

The introduction of miAssets transforms passive liquidity into dynamic, yield-generating tokens. These tokens are composable, meaning they can be integrated into a wide range of DeFi applications.

Developers can build financial instruments that:

  • Trade yields across chains.

  • Enable derivatives based on EOL’s performance.

  • Provide new liquidity mechanisms that reflect the collective power of the ecosystem.

For LPs, this turns traditional deposits into active assets that generate income while contributing to the growth of DeFi as a whole.

Building the Future of Liquidity

Mitosis isn’t just another DeFi protocol — it’s a paradigm shift. By treating liquidity as a shared resource and introducing a collective governance model, Mitosis creates a more sustainable, efficient, and transparent system.

With Ecosystem-Owned Liquidity and the Mitosis L1 chain, this project is setting a new standard for how liquidity is managed, traded, and optimized. It’s not just about improving DeFi — it’s about reshaping its foundation for the long term.

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