Native perma-liquidity solutions are crucial for crypto’s stability long-term
One of the best things a project can do is develop and implement solutions that guarantees it a growing pool of liquidity that's permanently locked.
When a project owns a LP position that is periodically fed new funds from various revenue sources and essentially has these funds permanently locked into a market pool, what happens is that the project enjoys deep liquidity so much that the stability of it is never threatened by secondary sources.
Every trade only leads to the pool growing, and regardless of the direction of trades, the pool remains a source of security for the project.
Although not native to Hive, this is something being done with @leofinance on Leodex from premium subscriptions and trading and affiliate fees and I believe there are other Hive projects planning something similar, I believe that would be the Speak Network via its service infrastructure pool(SIP) — although I'm not sure where things are at on this right now.
Whilst the rest of the cryptocurrency ecosystem rely on centralized market makers and independent whales who most of the time do not have the protocol or project's best interest at heart, to be the primary source of liquidity, Hive projects are building the stability that is required from the ground up.
Perma-liquidity ensures security and stability
The fact that not many(if any) projects outside Hive are doing this shows that they mostly don't care about decentralized stability and would rather focus on implementations that would allow for max central extraction of value generated from their projects.
Just a couple of days ago, Pump.fun announced its own decentralized exchange(DEX), effectively dropping Raydium and Ray supporters have been losing their shit since. With pump.fun’s revenue dropping, it was only inevitable that they'd seek more ways to capitalize fully on their ponzi market without max taxing users and creating their own dex where tokens are migrated onto was simply genius on their part.
This level of hunting revenue for central benefits is a playbook most projects are employing and it is evident in how their growth in revenue does not have any impact on the price of their native token.
Rather than deepening liquidity, most projects opt for buy back and burn which is rather a stupid and wasteful act on their part.
Perma-liquidity ensures security and stability because it acts as a vault that aids the expansion of a crypto project's economy and is also positioned to absorb back-flowing liquidity through sell offs into a safety net.
Most crypto projects do realize how important it is to have a protocol-owned liquidity that is permanently locked. In cases of huge market sell-offs, a deep perma-liquidity absorbs the panic and sells it back higher. It's the literal design of AMM liquidity pools.
You dump because you're scared(or as an attacker)? You're likely to buy back higher.
Rather than taking on the risk of whales or random individual traders absorbing tokens at cheap prices during panic sell-offs and effectively threatening the integrity of a project, a perma-liquidity serves as a vault that recalls funds and reissues them at higher prices to expand the market when confidence re-enters the equation.
Every crypto project should aim to develop perma-liquidity solutions that outsize every other liquidity source for its native assets. It cannot be stressed enough how important this is long-term. It's the single best decision that can be made to shield against market-side attacks from whales.
When an asset’s liquidity is primarily sourced from centralized markets, it's a big threat to its stability as an ecosystem and the entire economy leans on hopes and prayers that said liquidity sources do not capitalize on its influence to exploit the ecosystem.
This is the reality of most crypto projects today and it's evident in how random markets can significantly pump or dump the prices of several crypto assets.
Perma-liquidity is a solution every project should aim to implement. Certainly, it's much easier solution to incorporate by chains with dual-token economies as Hive, which is something I've discussed a couple of times to be also of great importance for each decentralized blockchain, but with a focus on deploying revenue-generating products and services, every crypto project can build a deep perma-liquidity pool for itself and protect its ecosystem against centralized market makers and secondary liquidity sources.
Posted Using INLEO