Introducing : Deliq | Enabling friction less flow of liquidity.
Detailed overview of Deliq Finance.
Deliq is the liquidity infrastructure layer that facilitates sustainable and free flowing liquidity across DeFi protocols by ,
- Providing liquidity in a non inflationary manner.
- Sourced in a decentralized/democratic way.
- Flows to exchanges to enable near zero slippage trades by providing deep liquidity.
- Creating capital efficient markets.
Why is Deliq necessary ?
Presently , Liquidity Mining is the primary method for protocols to extract liquidity into the system . Liquidity Mining was an important first step that lead to on boarding of the first million users of DeFi and helped kick start the DeFi summer. As the DeFi ecosystem is maturing various cracks in Liquidity Mining are visible . Liquidity Mining is inefficient and promotes misaligned incentives that are discussed below :
- Increases selling pressure on the token that hinders it’s price discovery.
- Attracts temporary liquidity that is not sustainable in the long term as LM rewards reduce over time.
- Large chunk of capital is used for obtaining temporary liquidity , capital that can be used to improve the core protocol.
Are centralized market makers the solution ?
Attracting liquidity to the protocol in this way is a costly affair that heavily relies on legal documents and trusting a centralized party. These entities usually centralize two resources extensive capital and trading strategies. Deliq with it’s Liquidity-by-Staking (LBS) model decentralizes the whole process of market making .
Liquidity is more important in DeFi compared to TradFi as every thing is tokenized . Deliq is the chainlink of liquidity , every protocol on very chain can get access to the deep liquidity provided by Deliq by just spinnig up a pool. Deliq will let protocols outsource their liquidity needs to Deliq using LBS model . A decentralized ecosystem will require a deep liquidity layer for interoperability between chains.
Enter Deliq Finance :
Every asset has it’s own token pool in Deliq ecosystem , and the protocol token DLQ is used to direct those assets. DLQ can be considered as a tokenized form of liquidity.When DLQ is staked into a token pool , the stakers can decide where this liquidity should be directed for maximal returns . The token pool assets are coupled with Deliq’s reserve of ETH /stable coins to provide liquidity to various exchanges and other protocols.
Benefits of using Deliq :
- New DeFi protocols : They can bootstrap liquidity in a capital efficient way without providing LM incentives and generate deep liquidity markets from the very beginning.
- Liquidity providers : LPs can can provide single sided liquidity without any risk of impermanent loss and earn high APY in terms of DLQ token.
- DAOs : Protocol DAOs can swap their token with DLQ token and open a pool to direct liquidity into their protocols.
- Market makers : They can use Deliq’s deep liquidity network and couple their trading expertise to generate high yields.
- Exchanges : Exchanges can utilize the extensive liquidity provided by Deliq to increase their market depth and provide near zero slippage trades to their users.
(Impermanent loss mitigation , going multi chain , Buy/Borrow model for DAOs and exploring the opportunity in layer 2 bridges will be covered in upcoming posts)
The three pillars of Deliq :
- Liquidity Providers : LPs deposit their tokens into the token pool of their choice , these tokens in the pool are coupled with assets in Basic pool(Avax/Usdc/Usdt) and then deployed to various exchanges / money markets for earning yields. The Impermanent loss risk is mitigated by using protocol control assets(PCA) and rewards which comprise of fee generated from liquidity provisioning and DAO-DAO swaps( More details on this later).
- Liquidity Directors : LDs use their market expertise and trading strategies to deploy the assets in the pool to various exchanges. LDs receive votes proportional to the amount of DLQ they stake into a pool for directing liquidity.
- DLQ token : DLQ is a form a tokenized liquidity as staking it gives you power to direct this liquidity. Rewards to LPs and LDs are distributed in the form of DLQ token and selling pressure is removed via auto staking option provided by Deliq. DLQ also acts as a backstop (like AAVE token) in case of excessive withdrawal from a single pool . DeliqDAO members are the holders of DLQ token and govern the protocol.
Few more details on working of protocol :
- d(assets) : LPs receive d(token) when they supply liquidity to the pool. d(tokens) are 1:1 redeemable for underlying asset.
- Phases: Deliq works in phases , reward distribution , withdrawal , deposits are all carried out in phased manner . Initially each phase will be of 1 week duration(can be changed by DLQ holders).
How does variable APY work ?
If a token pool has a large number assets which are not collateralized by enough DLQ then the LD side APY will increase to attract more DLQ and thus maintain stability by sufficient DLQ backing the pool.
If a token pool has less number of tokens collateralized by large number of DLQ then LP side APY increase to attract more tokens.
This mechanism ensures that when more liquidity is requested by LDs they are provided it via dynamic reward system.
Multichain vision :
Deliq will be focusing on Avalanche🔺 ecosystem and other block chains by supplying liquidity to various protocol and cross chain interoperability bridges . Deliq will leverage the low gas cost of and lightning fast transactions of Avalanche.
The ideal stage :
Initially Deliq’s LBS model will coexist with Liquidity Mining , but as time passes and protocols mature , Deliq will attract larger chunks of liquidity into the system. Although Deliq itself initially starts with Liquidity mining program of it’s own , we will slowly transform into a self sustaining protocol when there is no more need of inflationary token rewards as they are paid via protocol controlled assets (PCA) . How do we plan on reaching this stage ? that is the topic for upcoming posts.
Other details and updates will be covered in upcoming medium posts.
Below are the details to join the Deliq community
- Telegram : https://t.me/DeliqFinance
- Discord : https://discord.gg/byTvJACbsQ
- Twitter : https://twitter.com/deliqfinance
Check out our website here : https://deliqfinance.com/
Lots more to unpack , stay tuned for more updates.