Liquidity Providers

There are three types of liquidity providers leveraged by the protocol.

  1. 1.
    LPs who provide collateral to mint synthetic assets that can be traded via the platform. They enable the system to have cAssets which help bring price discovery forward and democratize access to private capital markets. These LPs will be denoted by LPminter
  2. 2.
    LPs who provide assets such as cAssets or stablecoins to the lending pools. They provide liquidity for margin trading and short selling specific cAssets. These LPs will be denoted by LPlenders
  3. 3.
    LPs who help make markets, allowing for the cAssets that are being traded via the decentralised orderbook to maintain narrow bid-ask spreads. These LPs will be denoted by LPmm
Liquidity providers for the protocol are slightly different from that of your typical decentralized trading platform. Instead of LPs providing an asset pair to an AMM to ensure the pool is healthy enough to trade and be priced fairly, cypher leverages a decentralized orderbook and allows for margin trading. This means LPs can both be minters, who help provide cAssets to the market for trading, as well as lenders. These two types of LPs are incentivized differently. LPminters receive a pro-rata portion of the trading fees generated by the market in which they help provide liquidity (and digital assets exchange services to other users). LPlenders will receive interest payments from the pool in which they are lending assets to. Market makers are incentivized by collecting bid-ask spreads in markets in which they are operating and will also have a reduced or zero trading fee for providing such a service.
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