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Chapter 7 - Democratizing Access and Reducing Risk

Mitosis introduces a revolutionary approach to liquidity provisioning in the DeFi space, addressing the imbalance between retail and institutional liquidity providers. At the core of this solution is Ecosystem-Owned Liquidity (EOL), a novel model that combines the strengths of both institutional and retail liquidity while introducing unique features that benefit all stakeholders within the ecosystem.

For LPs: Leveling the Playing Field​

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EOL democratizes liquidity provisioning by offering all participants advantages previously reserved for institutional players:

  • Early access to promising protocols
  • More lucrative reward structures
  • Guaranteed minimum yield

The collective nature of EOL mirrors the bargaining power of large institutions, leveraging scale and stability. However, EOL remains open to all: anyone can join by simply depositing assets into Mitosis Vaults, regardless of their size.

For Protocols: Mitigating Centralization Risk​

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EOL offers protocols a robust defense against centralization risks inherent in relying on institutional liquidity:

  1. Diversified Management: Unlike singular institutional liquidity, EOL is collectively managed by a diverse group of LPs, each with their own objectives and strategies.

  2. Balanced Liquidity Control: EOL prevents any single entity from controlling a substantial portion of liquidity, reducing the risk of sudden, large-scale withdrawals that could destabilize the protocol.

  3. Decentralized Governance: By distributing governance tokens among numerous LPs rather than concentrating them within a singular institution, protocols maintain a more democratic decision-making process.

  4. Stability Through Diversity: The varied interests of multiple LPs create a more stable liquidity environment, making extreme events less likely and ensuring a more resilient ecosystem.

By leveraging EOL, protocols can access substantial liquidity while preserving the decentralized principles fundamental to DeFi, effectively balancing growth with long-term sustainability.