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Key points
Cetus is a protocol for decentralized exchanges and liquidity systems. It 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 the CLMM (concentrated liquidity market maker) model that improves capital efficiency by allowing liquidity providers to set a tighter price range for their positions.
What is Cetus?
Cetus is a concentrated liquidity protocol and decentralized exchange (DEX) built on the Sui and Aptos blockchains. Its main goal is to facilitate trading for everyone by creating a flexible and robust network for market liquidity.
Cetus also aims to provide decentralized finance (DeFi) users with a high-end trading experience and improve the efficiency of liquidity usage in the Web3 ecosystem.
Main features of Cetus
Permissionless (no restrictions)
Cetus allows anyone, or any application, to use its core tools and functions freely. 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.
Programmable
Cetus is a flexible liquidity protocol based on the Concentrated Liquidity Market Marker (CLMM) liquidity model. It allows users to configure different trading strategies, including the most complex ones typically found on centralized exchanges. The CLMM model also allows liquidity providers to maximize their capital efficiency.
Composability
Cetus was built with integration in mind, offering “liquidity as a service.” This means that developers can easily utilize Cetus’ liquidity for their own services, such as creating vaults, derivatives, or leveraged farming products. Additionally, Cetus’ software tools allow new projects to quickly set up trading or swap interfaces on their platforms.
Sustainability
The Cetus ecosystem adopts a two-token model to ensure the long-term sustainability of the protocol. This model is designed to reward, in the long term, those who contribute and actively participate in the network's activities.
CETUS is the main native token and xCETUS is a liquidity staking token (LST) that represents staked CETUS tokens.
Concentrated Liquidity Market Maker (CLMM)
In a standard automated market maker (AMM) model, liquidity is evenly distributed across the price range. However, this 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 (LPs) can choose a narrower price range where there is high trading activity, allowing them to earn more fees by utilizing their liquidity more efficiently.
In a CLMM system, each price range that an LP chooses is called a position and providers can define multiple positions within a liquidity pool according to their trading strategies.
When the market price moves outside of a position’s range, this liquidity becomes inactive, meaning it stops generating fees until the price returns to within the defined range. This structure gives LPs the flexibility to adjust their strategies as the market moves, allowing them to maximize their returns by focusing on the most active price zones.
Why did Cetus choose Sui and Aptos blockchains?
Cetus operates a blockchain network with Aptos.
Sui is designed for fast transactions and instant settlements, making it ideal for applications that require immediate responses. Additionally, its innovative architecture enables new creative capabilities in the Web3 space.
Aptos is a new blockchain focused on speed, scalability, and resilience. The Cetus protocol plans to be a key part of the Aptos ecosystem as it grows, helping to build a more efficient network.
What can liquidity providers earn on Cetus?
Liquidity providers on Cetus can receive incentives in different ways:
Transaction Fees: Providers can earn fees based on the active price ranges where their liquidity is used for trades. This is often the primary method of earning for LPs.
Liquidity Mining: LPs can earn extra rewards based on their positions by collecting transaction fees in specific pools and price ranges. Liquidity mining generates specific NFTs that represent the positions of liquidity providers.
Loyalty Programs: Active participants can earn additional incentives through loyalty programs such as liquidity locks and ranking events.
Cetus Tokens
The Cetus protocol has two tokens: CETUS and xCETUS.
CETUS is the main token of the Cetus Protocol, designed as an interoperable token to be used as a medium of exchange on the network. Users can obtain CETUS through liquidity mining.
xCETUS is a non-transferable token that represents staked CETUS tokens. Users can participate in the Cetus network governance system according to their voting power (defined by xCETUS holdings).
Final considerations
Cetus Protocol is an innovative DEX on the Sui and Aptos blockchains that adopts the CLMM model. Its goal is to simplify trading by building a powerful and flexible liquidity network with tools capable of providing an enhanced trading experience and efficient use of liquidity for DeFi users.
Further reading
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