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Key points to remember
Cetus is a protocol for decentralized exchanges (DEX) and liquidity systems that is built on the Sui and Aptos blockchains.
Cetus' mission is to build a flexible and reliable liquidity network that makes trading easier and more efficient for DeFi users.
The Cetus protocol adopts a concentrated liquidity market maker (CLMM) model that can improve capital efficiency by allowing liquidity providers to choose a narrower price range for their positions.
What is Cetus?
Cetus is a decentralized exchange (DEX) and concentrated liquidity protocol built on the Sui and Aptos blockchains. Its main goal is to streamline and simplify trading for everyone by creating a flexible and robust network for market liquidity.
Cetus also aims to provide decentralized finance (DeFi) users with a best-in-class trading experience and improve the efficiency of liquidity usage in the Web3 space.
Main features of Cetus
Lack of authorization
Cetus allows anyone, or any application, to freely use its basic tools and functions. For example, users can use Cetus to create new trading pools or set up custom liquidity-related services. No special permissions are required to get started with the protocol.
Programmable
Cetus is a flexible liquidity protocol based on a liquidity model known as a concentrated liquidity market maker (CLMM). Users can configure all sorts of trading strategies, including more complex strategies that are more commonly found on centralized exchanges. The CLMM model also allows liquidity providers to maximize their capital efficiency.
Composability
Cetus is designed with integration in mind and offers “liquidity as a service”: developers can easily tap into Cetus’ liquidity for their own services, such as creating vaults, derivatives, or leveraged farming products. Cetus’ software tools also allow new projects to quickly set up trading or swap interfaces on their own pages.
Sustainability
The Cetus ecosystem uses a two-token model to ensure the long-term sustainability of the protocol. Such a model is designed to provide long-term rewards to those who actively contribute and participate in the network’s activities.
CETUS is the main native token and xCETUS is a liquidity staking token (TSL) that represents staked CETUS.
Concentrated Liquidity Market Maker (CLMM)
In a standard automated market maker (AMM) model, liquidity is distributed evenly across the entire price range. However, such distribution often leaves most of the liquidity unused, especially in stablecoin pools where prices remain relatively stable.
In the concentrated liquidity market maker (CLMM) model, liquidity providers (FL or LPs) can choose a narrower price range when trading activity is high, allowing them to earn more fees by better utilizing their liquidity.
In a CLMM system, each price range chosen by a content provider is called a position, and providers can define multiple positions within a liquidity pool to match their trading strategies.
When the market price moves outside of a position’s range, that liquidity stops being active, meaning it stops generating fees until the price moves back into the range. This setup gives liquidity providers the flexibility to adjust their strategies based on market trends, potentially maximizing their returns by targeting active price areas.
Why did Cetus choose Sui and Aptos?
Cetus operates on the Sui and Aptos blockchain networks.
Sui is designed for high throughput transactions and instant settlements, making it ideal for applications that require fast responses. Its unique architecture also enables new creative capabilities in the Web3 space.
Aptos is a new blockchain that aims to improve speed, scalability, and resilience. As it grows, Cetus plans to be a key part of the Aptos ecosystem, helping build a more efficient network.
What can liquidity providers earn on Cetus?
Liquidity providers on Cetus can earn incentives in a number of ways:
Transaction Fees: Providers can earn fees based on active price ranges where their liquidity is used in trades. This is often the primary method of earning FLs.
Liquidity Mining: Liquidity providers can earn additional rewards based on their positions when they earn transaction fees in specific pools and price ranges. Liquidity mining generates specific NFTs that represent the liquidity providers’ position.
Loyalty Programs: Active participants can earn additional incentives through loyalty programs such as liquidity locks and ranked competitions.
Cetus Tokens
Cetus has two tokens: CETUS and xCETUS.
CETUS is the main token of the CETUS protocol, designed as an interoperable token that can be used as a means of exchange within the network. Users can earn CETUS through liquidity mining.
xCETUS is a non-transferable escrow token that represents staked CETUS. Users can participate in the Cetus network governance system based on their voting power (defined by their xCETUS holdings).
Conclusion
Cetus is an innovative decentralized exchange (DEX) platform on Sui and Aptos that adopts the CLMM model. Cetus aims to simplify trading by building a flexible and high-performance liquidity network with tools that can provide a seamless trading experience and efficient use of liquidity for DeFi users.
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