Liquidity in its simplest form refers to how easily a cryptocurrency can be converted to cash without affecting its overall said value. It is also known how exchanges allow transactions to be completed almost immediately without price slippage. In most cases, a network’s liquidity level will mostly depend on how many users are active on that particular network. The success of DeFi apps and dApps is heavily dependent on liquidity. We’ve seen countless instances of DeFi enterprises that performed well in recent months, but a lack of funding has always been a difficult challenge for scaling and multiplying.
Despite the tremendous price fluctuations displayed over time, cryptocurrencies like Bitcoin(BTC), Solana (SOL), XRP, Ariva, and others are listed among the top liquid currencies. However, despite how much the crypto market preaches liquidity, illiquidity is still one of its significant problems. And what illiquidity means for projects is that they would have to list their tokens on centralized exchanges, which are prone to security issues, hacks, and internal fraud.
DeFi protocols must ensure that decentralized projects have enough liquidity to avoid the negative consequences of volatility on token prices. Calyx token is a permissionless, community-driven liquidity protocol that will allow multi-chain crypto trading and the sourcing of liquidity from diverse liquidity sources to stimulate trade and token swaps at the fairest rates. By integrating the liquidity source from various networks, the system will support other blockchain networks to solve the problem of illiquidity.
Calyx Liquidity Pool
Being one of the most recent liquidity pools to reach the market, the Calyx token employs improved technology to enable customers to avoid lengthy processing periods and excessive gas fees customary on cryptocurrency exchange platforms. The platform’s trading solution, Calyx Swap, works by sourcing liquidity from multiple chains belonging to various blockchain networks like Solana(SOL), XRP, Polygon (MATIC), Binance (BNB). It also provides users with the best rate for all exchanges done on any supported blockchain network. This helps ensure that projects are provided with sufficient liquidity, and the problem of illiquidity is reduced in diverse networks.
The system will provide market access to multiple liquidity providers and incentivize them for their various contribution tokens of ERC20 tokens to the common liquidity pools. CalyxSwap will enable Liquidity pool creators to create a pool on several blockchain networks of their choice, adding liquidity to existing pools in the protocol. This would result in LPs having a higher capital efficiency and users paying less slippage. Because CalyxSwap is permissionless, anybody, including traders and token teams, can become a Liquidity Provider or create a pool by donating an equivalent quantity of underlying tokens in return for LP tokens. The network also ensures that members have a say in the entire development process, making it inclusive and genuinely decentralized.
Liquidity Protocol Hubs
The liquidity protocol hub is a feature that originated from the realization that a single liquidity protocol is not enough to fulfil the needs of all users and traders, liquidity providers, and other market participants. Therefore, a liquidity protocol hub will provide diverse liquidity protocol hubs rather than a single one. Having multiple liquidity sources will improve flexibility for most traders and increase the ability to get liquidity from whatever protocol they want while filtering out the liquidity sources they don’t need. As a result, gas expenses will be significantly lowered, while numerous on-chain and off-chain aggregation alternatives will be available.
If liquidity is scarce, a more volatile market will emerge, resulting in considerable price fluctuations. On the other hand, if there is enough liquidity, markets will be less volatile, and prices will not change significantly. The Calyx network is a promising liquidity protocol with enough potential to be listed among the top liquid currencies. It ensures decentralized projects are offered adequate liquidity to prevent the harsh effects of volatility.
Find out more on CLX using the links below
Disclaimer: This is a paid release. The statements, views and opinions expressed in this column are solely those of the content provider and do not necessarily represent those of Bitcoinist. Bitcoinist does not guarantee the accuracy or timeliness of information available in such content. Do your research and invest at your own risk.