Liquidity Repurposing

This page was drafted in December 2020 and is currently due for an update. The core concepts are implemented as planned and the only difference is the formula used to plot the curve: y = kp/(x+k)

Liquidity Repurposing

The intervention of arbitrageurs whenever AMM prices deviate from external prices ensures that AMM prices remain rangebound when compared to external prices. Liquidity Maximization also enhances this effect by increasing slippage whenever the Internal Price varies largely from the External Price. As a result, a portion of the liquidity in the pool is often underutilised as traders would not trade on such a high slippage and would more likely wait for a correction of the Internal Price.

This underutilised liquidity can then be repurposed into other DeFi solutions in the industry such as lending platforms. Through efficient allocation of the liquidity, Centaur Swap greatly enhances the yield generated for liquidity providers.