A model for stabilizing liquidity pools with $CACAO. Optimizing can only be done when there’s more than one option.
If decentralized Cross-Chain technologies are going to replace CeFi, they will require serious liquidity depth and tremendous volume. And because volume follows depth, this should be Maya’s main focus and priority, only behind security. With enough depth, slip fees make swaps more affordable for larger trades too.
Maya’s Stable Pools feature is one additional step to increase liquidity and depth in the protocol.The Maya Economy will have 5 stablecoins in its suite (if approved by nodes). Each of them with a different economic design plus different strengths and weaknesses; they will all help share the market’s needs and alleviate external pressures on the supply and demand. Failure of one design should not trickle into the others and systemic shocks should have orderly and reasonable responses.
Assets usually have to be contributed into Liquidity Pools in equal USD denominations, for example in an typical ETH / $CACAO pool, LP’s would need to input $100 USD worth of $CACAO for every $100 USD worth of ETH. This requirement might not be ideal for many investors, who do not want exposure to the price fluctuation of $CACAO or who do not want to risk having Impermanent Loss.
In addition to our $CACAO pools, we have designed special Liquidity Pools that pair assets against our stablecoin $USc, that enjoy Impermanent Loss Protection and that are enhanced with slip-fees optimizers in order to attract more institutional and conservative investors. Internally, our systems will route all trades in the most efficient way using both our regular and our Stable Pools to give our users better prices and bigger notional depth. We hope that external DEx User Interfaces like this model of pools and connect to them, in combination with THORChain’s.
Finally, to any and all User Interfaces that already work with THORChain and that wish to connect into Maya to increase reliability and decentralization, we suggest that they use this method too, breaking big transactions into smaller ones, and routing them through both protocols, proportional to the best available pool depths. This would of course result in better trading fees while benefiting both LP’s in both protocols.
Inside Maya, all trades to or from $CACAO, as well as trades to or from $USc can clearly use only one pool, for example someone trading BTC for $CACAO will readily use the BTC / $CACAO pool.
However, for “longer” swaps, like BTC to ETH, the transaction can be completed using all four pools, as long as the partition is known for how to get lower slip-based fees. In the same example, these four pools are: BTC / $CACAO, BTC / $USc, $CACAO / ETH and $USc / ETH.
The optimal amounts and paths considering four pools is not trivial, given that they can all have different depths and that you need to commit to a proportion of the funds from the beginning.
This in turn increases the likelihood of a multi-thorlike future of cross-chain technologies, where a network of L0’s collaborate together, route liquidity to each other and mutually increase their resilience.
Interestingly, Maya’s economic simulation results have been outstanding. Even if Thorchain pools are 3x deeper than Maya, users still get around 23.8% saved in transactions of 1% depth of the inbound pools when using the optimized double route. That is very significant for any user at those amounts, so User Interfaces should really take supporting Maya seriously. It is important to note that User Interfaces would still get the same affiliate fee in absolute amounts, their users would just pay less, making User Interfaces who support Maya more competitive than those who don’t.
Stable Pools are one of the several features created to accrue value to $CACAO holders and strengthen the economic viability of the protocol. You can learn more about other equally important features like Liquidity Nodes, Security Nodes, and Aztec Chain in our other articles!
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