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Key aspects
Cetus is a protocol for decentralized exchanges and liquidity systems. It is based on the Sui and Aptos blockchains.
Cetus's 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 concentrated liquidity market maker model (CLMM) 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 a concentrated liquidity protocol based on the Sui and Aptos blockchains. Its main goal is to make trading smoother and simpler for everyone by creating a flexible and robust network for market liquidity.
Cetus also aims to provide decentralized finance (DeFi) with a top-notch trading experience and make liquidity usage more efficient across the Web3 space.
Key features of Cetus
Permissionless
Cetus allows anyone or any application to freely use its main tools and features. For example, users can use Cetus to create new trading pools or set up custom services related to liquidity. No special permissions are needed to get started.
Programmable
Cetus is a flexible liquidity protocol based on a liquidity model known as Concentrated Liquidity Market Maker (CLMM). Users can set up all kinds of trading strategies, including the more complex ones commonly found in centralized exchanges. The CLMM model also allows liquidity providers to maximize the efficiency of their capital.
Composability
Cetus has been designed with integration in mind and offers "liquidity as a service". This means that developers can easily leverage Cetus's liquidity for their own services, such as creating warehouses, derivatives, or leveraged farming products. Cetus's software tools also allow new projects to quickly set up trading or swap interfaces on their own pages.
Sustainability
The Cetus ecosystem uses a dual-token model to ensure the long-term sustainability of the protocol. This model is designed to offer long-term rewards to 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 CETUS in stake.
Concentrated Liquidity Market Maker (CLMM)
In a standard Automated Market Maker ("AMM"), liquidity is distributed evenly across the price range. However, this often leaves most of the liquidity unused, especially in pools of stablecoins where prices remain relatively stable.
In the Concentrated Liquidity Market Maker (CLMM) model, liquidity providers (LP) can choose a narrower price range where trading activity is high, allowing them to earn more fees by making better use of their liquidity.
In a CLMM system, each price range chosen by an LP is called a position, and providers can set up multiple positions within the same liquidity pool to match their trading strategies.
When the market price moves outside the range of a position, that liquidity becomes inactive, meaning it stops earning fees until the price returns to within the range. This setup offers liquidity providers the flexibility to adjust their strategies based on market trends, potentially maximizing their returns by focusing on active price areas.
Why did Cetus choose Sui and Aptos?
Cetus operates on the Sui and Aptos blockchain networks.
Sui is designed for high-speed transactions and instant settlements, making it ideal for applications that require quick responses. Its unique architecture also allows for the incorporation of new creative features in the space of Web3.
Aptos is a new blockchain with ambitions of speed, scalability, and resilience. As it grows, Cetus plans to be a key part of the Aptos ecosystem, helping to build a more efficient network.
What can liquidity providers earn on Cetus?
Liquidity providers on Cetus can earn incentives in different ways:
Transaction fees: providers can earn fees based on the active price ranges in which their liquidity is used in trades. This is usually the main method for LPs to earn.
Liquidity mining: LPs can earn additional rewards based on their positions by collecting transaction fees in specific pools and price ranges. Liquidity mining generates specific NFTs that represent the position of liquidity providers.
Loyalty programs: Active participants can earn additional incentives through loyalty programs such as liquidity locks and ranking events.
Cetus Tokens
Cetus 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 within the network. Users can earn CETUS through liquidity mining.
xCETUS is a non-transferable custodial token that represents CETUS in staking. Users can participate in the governance system of the Cetus network based on their voting power (defined by their xCETUS holdings).
Conclusions
Cetus is an innovative DEX on Sui and Aptos that adopts the CLMM model. Cetus aims to simplify trading by building a flexible and powerful liquidity network with tools that can provide a smooth trading experience and efficient use of liquidity for DeFi users.
Additional readings
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