Liquidity Flow Case-study
An example of a liquidity flow as we imagine how it could be implemented in cloverfield, based on how it was done in cloverfield testnet by the team while running a test hedger operation.
The values provided are real-live values from our tests in march/april:
Let me walk you through the flow of our current Hedging MVP on https://cloverfield.exchange:
LP deposits USDC into an on-chain contract.
LP Software streams quotes (that it got from scanning the Binance order book) to Cloverfield.
A trader visits Cloverfield to requests a trade via an INTENT.
LP software reads the event of his request & lock his quote with an on-chain Tx
LP software opens a countertrade on Binance.
Then, LP software fills the locked quote from the user on-chain.
We are completely delta neutral. We generate profits by charging the user more on-chain than we pay off-chain.
For example:
The user wishes to go long on BTC for $10,000.
The current price on Binance is $27,500,
MarketMaker quoted the user on-chain at $27,775.
MarketMaker earns the difference in PnL.
The same applies to funding rates:
MarketMaker pays 10% yearly funding on Binance,
MarketMaker charges 20% onchain.
MarketMaker earns the difference in funding.
And this is only a simple structured product the first MarketMaker created on top of SYMMIO; Rasa could also hedge itself using spot markets and don't pay any funding or use futures contracts possibilities are endless; the opportunity to capture the on-chain derivatives market is now.
Despite earning on higher spreads and fees, MarketMaker offering via SYMMIO remains competitive with GMX, Gains, and DyDx.
Markets on-chain are still inefficient. This presents an opportunity for a liquidity/spread/funding arbitrage between on-chain and off-chain.
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