Research Summary
This report discusses the importance of liquidity in the crypto industry and how Unstoppable, a DeFi super app, aims to replace Centralized Exchanges (CEXs) by ensuring high liquidity. The report explains Unstoppable’s innovative approach to attracting liquidity, including the provision of single-sided liquidity for Margin DEX trades, and the benefits this offers to Liquidity Providers (LPs). It also discusses the potential risks and safety measures associated with providing liquidity on Unstoppable.
Key Takeaways
Importance of Liquidity in Crypto
- Liquidity as a crucial factor: The report emphasizes the importance of liquidity in the crypto industry, stating that it is a make-or-break factor for almost all trading products/instruments. Without liquidity, trading experiences high slippage and poor execution, leading to lower volumes.
- Tokenomic designs and liquidity: The report notes that tokenomic designs are primarily based on finding the most efficient ways to incentivize liquidity, highlighting the industry’s focus on this aspect.
- CEXs and liquidity: The report points out that one of the main reasons people choose to transact on CEXs, despite their risks, is their superior liquidity.
Unstoppable’s Approach to Liquidity
- Unstoppable’s mission: Unstoppable aims to replace CEXs and bring everyone on-chain with their DeFi super app. To achieve this, they need to ensure high liquidity on their platform.
- Single-sided liquidity provision: Unstoppable allows users to provide single-sided liquidity for Margin DEX trades, a mechanism different from traditional margin DEX platforms. This approach eliminates the risk of impermanent loss for LPs and provides them with a borrow fee every time a trader borrows from the pool.
- Benefits for LPs: The report suggests that Unstoppable’s approach to liquidity provision is preferable for LPs, offering a superior user experience that is easy, convenient, and profitable.
Risks and Safety Measures
- Potential risk of liquidation: The report acknowledges the potential risk of liquidation, where positions are not liquidated properly and timely, leading to LPs absorbing the loss.
- Safety module LP: To mitigate the risk of liquidation, Unstoppable offers the safety module LP. LPs providing liquidity with the safety module are betting that the liquidation engine and its redundancy layers will work fine. In the unlikely event of a failure, funds from the safety module will be used to absorb the liquidation.
Actionable Insights
- Exploring Unstoppable’s liquidity provision: Crypto traders and investors may want to explore Unstoppable’s innovative approach to liquidity provision, which offers a superior user experience and potential profits.
- Understanding the risks and safety measures: It’s crucial for potential LPs to understand the risks associated with providing liquidity on Unstoppable, including the potential risk of liquidation, and the safety measures in place to mitigate these risks.
- Monitoring Unstoppable’s growth: Stakeholders in the crypto industry may want to monitor Unstoppable’s growth and its potential to replace CEXs, as this could have significant implications for the industry.
