πŸ“ΆThe Most Capital Efficient Liquidity

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Capital Efficiency Intro

Most large decentralized perpetual protocols utilize liquidity pools to enable trading by which liquidity providers (LPs) lock up theirs assets in the pool and receive an index token that tracks the pool's performance. Additionally, these LPs act as the counterparty for trades, bearing the profit and loss (PnL) against traders’ positions and, in return, they earn a share of the trading fees generated by the protocol.

Multi-Asset LP pools are the cornerstones for their chain, enabling deep liquidity of multiple assets and serving as a yield bearing index fund. For example, GMX's GLP contributes to 20% of Arbitrum’s $2 billion TVL and a large amount of trades are routed through it.

Cadence’s multi-asset pool (CLP) will create micro-economies, similar to those built around GMX's GLP for auto-compounding, collateralization, and leveraged yield; thereby attracting more liquidity and strengthening Canto's ecosystem and Cadence's overall TVL thus benefiting users.

Cadence Protocol will be the most capital efficient perpetuals protocols through the integration of three key features that provide users with a suite of additional incentives and yield-generating assets.

These features include:

  1. Contract Secured Revenue (CSR)

  2. Liquid Staking Derivatives (LSDs)

  3. RWAs as Collateral

Contract Secured Revenue (CSR)

Canto implements a fee split model called Contract Secured Revenue, or CSR, by means of the x/CSR module. CSR in Cadence allows users to claim a percentage of all transaction fees paid when interacting with Cadence smart contracts. These fees will be redistributed back into Cadence's stakers in oder to provide extra yield and incentives.

Liquid Staking Derivatives (LSDs)

Liquid staking derivatives (LSDs) offer stakers the opportunity to earn yield while retaining the liquidity of their staked assets. When you stake your $CAD, LSDs are issued as IOUs, maintaining a 1:1 value relationship.

LSDs also automatically accumulate yield, eliminating the need to spend on gas fees for withdrawing staking rewards.

On Cadence Protocol, users can acquire liquidity on staked assets and use staked assets as collateral in trading and staking.

This means that while your tokens are locked up and earning staking rewards, you can also use that same value elsewhere in other DeFi protocols β€” earning additional yield.

RWAs as Collateral on Cadence Protocol

Cadence Protocol will be one of the prime use cases to earn additional yield on a user's $cNOTE and future Canto RWAs. This maximizes the capital efficiency and drives liquidity for Cadence's CLP pool, while also unlocking traders to earn interest on their collateral.

Our multi-asset pool will consist of $cNOTE as its main stablecoin which allows the pool to generate ~5% yield regardless of trading volume or market conditions. This is compounded with Cadence's CSR earnings given back into the pool, ultimately generating the most capital efficient and deep liquidity pool in perps, and bringing a new primitive to Canto. This enables new possibilities for perpetuals in DeFi, merging TradFi stability with decentralized finance.

Summary

Cadence is the first protocol to enable users to maximize their capital's efficiency by:

  • Earning transaction revenue from smart contract interactions via CSR

  • Earning additional yield by accepting LSDs as collateral for staking and trading

  • Earning extra real-yield advantages by incorporating RWAs such as $cNOTE as collateral

All of these various yield generating streams are further compounded with Cadence's vesting rewards, multiplier points, and fee revenues providing the most capital efficient liquidity pool for stakers and traders.

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