What is Cetus?
Cetus is a decentralized exchange (DEX) and a specialized liquidity protocol designed for the Sui and Aptos blockchains. Its main purpose is to enhance trading efficiency by establishing a dynamic and robust environment for liquidity in the decentralized finance (DeFi) space, aimed at providing Web3 users with an optimal trading experience.
Core Features of Cetus
Permissionless Access. Cetus enables any user or application to access its primary functionalities without restriction. This flexibility allows users to create new trading pools and set up liquidity services independently, removing the need for special permissions.
Programmable Liquidity. The Cetus protocol uses a model known as Concentrated Liquidity Market Maker (CLMM), offering users a high level of flexibility for setting up various trading strategies, including complex ones typically seen on centralized exchanges. CLMM allows liquidity providers to focus their capital efficiently within specific price ranges.
Composability. Cetus operates with integration in mind, providing “Liquidity as a Service.” Developers can easily integrate Cetus’s liquidity into their own products, such as vaults or leveraged farming tools. Cetus also offers software kits to help new projects quickly set up trading or swap features.
Sustainable Model. With a dual-token system, Cetus aims for long-term viability. The protocol offers rewards for users who actively engage in network activities, helping maintain a sustainable ecosystem. CETUS serves as the native token, while xCETUS is a liquidity staking token (LST) that represents staked CETUS.
Concentrated Liquidity Market Maker (CLMM) Model
In traditional AMMs, liquidity is spread across a wide range of prices, leading to inefficiencies, especially in stablecoin pools where prices don’t fluctuate significantly. The CLMM model used by Cetus lets liquidity providers target narrower price ranges, maximizing earnings by focusing liquidity in zones with higher trade activity.
In CLMM, each targeted price range set by a provider is known as a “position.” Providers can set multiple positions within a liquidity pool, allowing them to adapt their strategies as market conditions change. When the price moves out of a position's range, the liquidity stops earning fees until it moves back within the chosen range, enabling providers to optimize returns by targeting high-activity zones.
Why Sui and Aptos?
Cetus operates on both the Sui and Aptos blockchains due to their distinctive capabilities:
Sui is tailored for fast transaction processing and immediate settlements, making it ideal for applications requiring real-time responsiveness and creative new features in the Web3 ecosystem.
Aptos is a newer blockchain with a focus on speed, scalability, and security. As Aptos evolves, Cetus aims to play an integral role, contributing to the blockchain’s ecosystem as it grows.
Earnings for Liquidity Providers on Cetus
Liquidity providers on Cetus have several earning opportunities:
Transaction Fees: LPs earn fees on trades that occur within their selected price ranges, representing a core revenue stream.
Liquidity Mining: Providers can receive additional rewards in certain pools and price ranges, which may also generate unique NFTs representing their liquidity positions.
Loyalty Programs: Cetus may offer extra rewards through loyalty initiatives, including liquidity lockups and leaderboard events for active participants.
Cetus Tokens
Cetus utilizes two tokens: CETUS and xCETUS.
CETUS: The primary token within the protocol, CETUS is used as an exchange medium and can be earned through liquidity mining.
xCETUS: A non-transferable token representing staked CETUS, which grants users governance rights within the Cetus network. Voting power in the protocol is based on the quantity of xCETUS held.
Final Thoughts
As a decentralized exchange operating on Sui and Aptos, Cetus brings a CLMM-based approach to liquidity management, aiming to create an adaptive and efficient trading environment. Its advanced tools and flexible setup are geared towards delivering an improved trading experience and better liquidity usage for DeFi users.
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