Liquidity Marketplace

The role of Autopilot & Liquidity Management Pools to form the Liquidity Marketplace.

Introduction to Liquidity Marketplace

201 Level Core Concepts Course

The Liquidity Marketplace is a feature of Tokemak v2 that offers a novel approach to liquidity management for DAOs (Decentralized Autonomous Organizations). It enables real-time liquidity rental from any given Liquidity Management Pool (LMP) according to a transparent liquidity rate. This rate is determined by market dynamics that define the output liquidity rate discovered by the Autopilot rebalancing logic.

One of the key characteristics of this product is the ability of DAOs to acquire liquidity directly and in quasi real-time, bypassing indirect incentive mechanisms. As a result, Tokemak’s Liquidity Marketplace constitutes a system through which buyers can bid for liquidity at the current liquidity rate. The rebalancing logic treats these bids as internal and prioritized inputs.

Rates are sensitive to the supply and demand associated with this product, meaning that the liquidity rate increases when demand is high, and decreases when supply is high. Although buyers might place bids at any rate, the rebalancing logic will only provide liquidity once the bid is above Tokemak’s liquidity rate which represents the market price for liquidity rental. That is to say, the Liquidity Marketplace has a floor rate that is equal to the liquidity rate.

While using this system, LST protocols are able to select a destination across different DEXs, select the desired depth, and deposit incentives to acquire liquidity at Tokemak’s rate in real-time. This flexibility is particularly relevant for LST protocols to reinforce liquidity during events of on-chain liquidations and large validator exit queues. Furthermore, this ensures that buyers pay exclusively for liquidity that is allocated to them instead of overpaying through traditional indirect incentive mechanisms that result in an unknown depth of liquidity.