Composition (Topic)
The inherence of directional exposure in LPs.
The DEX must separate liquidity layers strategically to hedge its exposure to market conditions. The % of a token's circulation paired with another asset is (roughly) = its total price exposure to it.
Arbitrage needs no justification from us. It is a part of market-making. Programming the conditions under which a beneficial arbitrage situation occurs in our favor needs no further explanation.
It is a part of market-making, and decentralized market-making is an end in itself. Nevermind the business of balancing the risk of LPs in this space - value is hard to find in the first place. It is difficult to lock up in the second. It is almost impossible to keep locked up with finality unless a sustainable model that inspires confidence can be shown to have been built around it and secured.
The exchange needs only a bootstrapping initiative that finds value, locks it, pools it, and compounds it by making use of the most powerful tools available on blockchain.
Last modified 7d ago