Cetus is a Dex and liquidity protocol based on the Move ecosystem. It uses an algorithm similar to uniswap V3 to build a centralized liquidity protocol and a series of ancillary functions to provide DeFi users with the best trading experience and higher capital efficiency. At the same time, the unique ecological characteristics of SUI are used to create composable functions that are different from Uniswap.

01

Who does DEX serve?

The on-chain encryption trading market is a relatively small but rapidly growing market. In such a market, the biggest characteristic is that the vast majority of asset types (and are still produced in large numbers every day) are low-liquidity and low-market-capitalization assets, and the demand for price discovery is strong. In such market conditions, how to better conduct price discovery to attract liquidity is a prerequisite for the prosperity of on-chain transactions. Therefore, we believe that DEX should first serve LP.

What is LP’s appeal? In different transaction scenarios, LPs have different demands. At the beginning of the year, we proposed the idea that the audience determines liquidity, and divided on-chain assets into two categories: mainstream assets (the top ten assets in terms of transaction volume on major public chains) and long-tail assets. Their LP needs are not consistent:

Mainstream LP: Get more fee income and less impermanent losses (Uni V3 is better)

Long-tail asset LP: cheaper, controllable, and flexible market capitalization strategy (Uni V2 is more convenient and has low liquidity management costs)

In the long run, V3 with better capital efficiency is the trend, but because of such differences in demand, Uni V2 and V3 can always coexist in terms of data. But the market will inevitably produce players who take into account the needs of both. In an emerging ecosystem like SUI, Cetus is a stronger candidate.

02

Cetus: Move ecosystem’s first centralized liquidity protocol Dex

Cetus currently has complete products including Swap, permissionless liquidity pools, and cross-connect bridges.



Concentrate liquidity

Cetus uses a centralized liquidity market-making algorithm similar to Uniswap V3. An LP can create multiple positions in the same pool. By setting different price ranges, LPs can simulate different price curves to implement their custom strategies. When the price keeps changing as new swaps are executed, the smart contract consumes all available liquidity within the current quote range until the next price Tick is reached, at which point the contract will immediately switch to the new Tick, the newly activated Tick Any dormant liquidity within the interval will be activated. At the same time, there is a correlation between the Tick interval and the level of transaction fees. The higher the transaction fee, the closer the Tick points are.

By pooling liquidity, LPs can earn more transaction fees and have higher capital efficiency.

Building a pool without permission

Before SUI, one of the representatives of high-speed public chains was Solana. However, a major factor in the lack of stamina in Solana's ecological development was the lack of permissionless DEX pools in the ecosystem for a long time. It is difficult for community-based or MEME projects to arise, resulting in insufficient attention to the ecology, lack of new hot money, and the status of a "big chain". Today, when SUI is online, the status of native projects in the community will play a decisive role in whether the ecosystem can prosper rapidly. In Cetus, users can create liquidity pools without permission, and projects can launch new tokens on Cetus without permission. In this way, Cetus will attract more early project parties and quickly form pricing power for long-tail assets.

Flexible transaction fees

Cetus allows teams and users to choose customized transaction fee levels. Multiple pools can be set up for the same token with different transaction fee levels. Currently, four levels of transaction fees are allowed: 0.01%, 0.05%, 0.25%, and 1%. Through this design, the market is encouraged to find the most appropriate liquidity allocation plan on its own, providing greater flexibility to LPs and trading users. Low-volatility assets such as stablecoin trading pairs may be concentrated in pools with the lowest fees, while assets with high volatility or low trading volume may be concentrated in high-fee pools to hedge risks.

Automatic position management

Users can implement operations such as take-profit orders and limit orders based on range orders. After a position is exceeded, users generally need to exit the position assets in a timely manner to avoid the spot price from re-entering the price range. Users can also use third-party position managers integrated with Cetus for management, thereby reducing the difficulty of liquidity management and facilitating long-tail asset LP.

composability

CETUS supports a high degree of composability. Other project teams can also integrate the Cetus SDK and easily build an interchange interface on their own front-end to quickly access Cetus liquidity. For example, the within-ecology option project Typus realizes one-click hedging of long-tail assets by accessing CETUS, while improving the liquidity and coverage of its own options.

Secure cross-chain bridge

The cross-chain bridge created by Cetus based on Wormhole was launched in November last year. Users can safely and conveniently cross assets of nearly 20 public chains.

Strong correlation token economic model

Cetus chose the xToken economic model. By holding CETUS tokens and xCETUS, users can obtain agreement revenue sharing, ensuring the consistency of the interests of the community and the agreement.

03

Cetus Team: Mature centralized liquidity market making algorithm development experience

Uniswap v3 is an innovation in the Defi architecture. Its core is the centralized liquidity market making algorithm (CLMM), which maximizes LP's capital utilization. However, Uniswap formulated a commercial source code license in March 2021 to prevent others from forking its source code, and the license expired in April. On the EVM chain, competitors such as Pancake and Quickswap have launched V3 alternatives. But on non-EVM high-speed chains, there are fewer competitors on the CLMM track. In the future, competition among CLMM-type DEXs will tend to be on the operational side, and Uniswap, which is light on operations, will gradually become weaker.

Behind Cetus is a Dex team with mature development and operation experience, and its APTOS version has been deployed and is running stably. On the premise that the product is guaranteed, the BD capabilities within the ecosystem are strong, and the operation has the ability to sustain narrative, the Cetus team is expected to gain the leading position in CLMM infrastructure on SUI.



04

The soil for Defi innovation brought by centralized liquidity protocols

LP automated liquidity management protocol

Under a centralized liquidity agreement, LPs generally choose to provide liquidity near the market price. However, when the market price exceeds the scope of the strategy, LPs not only face impermanent losses but also are no longer able to earn LP fees. LPs need to proactively deploy market-making strategies again. . The automated liquidity management protocol emerged as the times require, and it can help LPs automatically execute market-making strategies. The TVL of leading projects such as Arrakis Finance has reached US$440 million.



This type of agreement can also implement:

  • For LP mining of unilateral assets, LP can deploy initial liquidity in a tilted manner, such as only deploying project side tokens. The protocol can help absorb basic assets such as USDT or ETH to balance the liquidity mix, and then with the transaction, the project's The native assets will be gradually converted into underlying assets. In this case, it means that LP can achieve liquidity without selling its own tokens or needing to incentivize external capital.

  • Issue ERC20 LP tokens to LP providers. These LP tokens can not only be liquid, but can also be remortgaged, further improving the capital efficiency of LP assets.

New machine gun pools and leveraged mining

Leveraged mining also existed in passive liquidity mining in the past. However, because liquidity is evenly distributed, the comprehensive rate of return of leveraged mining is not ideal. Under the CLMM algorithm, the capital advantage is magnified. Professional quantitative institutions and The market maker team can implement more customized strategies in a granular manner, and the machine gun pool can obtain funds from protocol users or lending agreements, and adopt proactive and robust strategies to obtain profits, which is of great value to large-scale users with investment needs.

New derivatives system

Under the CLMM system, while LP returns increase, they also face higher risks of uncertainty. Under extreme market conditions, the liquidity of the LP set range will be drained by arbitrageurs. How to construct derivatives that can hedge LP market making risks to buffer them? The damage to LP's interests caused by the malicious smashing of projects is also a track worthy of attention.

Based on the composability advantage of the CLMM algorithm, there is still a lot of potential for Defi protocols to be tapped. Especially after the FTX thunderstorm and BUSD being regulated, the importance of Defi has become more and more obvious. The above three Defi products are just the tip of the iceberg. .

Summarize

We believe that the Cetus team is a team with mature product delivery capabilities, strong inter-ecological BD capabilities and operational capabilities. They have a deep and unique understanding of the DEX product and track. We believe that Cetus has high potential to become the leader in a unique ecological track like SUI.