Capital Efficiency

Current liquidity networks are not fully prepared to address the growth potential of the upcoming cross-chain DeFi because they can only operate cross-chain transfers regardless of the size of their liquidity. Cross-chain transfer is just a fraction of the cross-chain DeFi market.

Therefore, the usage of collected capital in liquidity networks is limited to a fraction of its full potential. The limited usage directly impacts the volume of liquidity as it renders the protocol a less attractive platform to provide liquidity.

In other words, liquidity providers (LPs) for liquidity networks would be reluctant to forego yield sources other than cross-chain transfer.

This results in a limited volume of liquidity, which poses a significant problem because the volume of liquidity is directly linked to cross-chain user experience, affecting the speed of settlement and the extent of slippage.

Mitosis unlocks the potential of cross-chain liquidity

Mitosis Liquidity Protocol ensures scalability in capital efficiency because it is capable of operating an increasingly wider range of cross-chain DeFi demands as liquidity increases. This is facilitated by Mitosis’ unique architecture. The two key components involved are miAssets and the Mitosis Ecosystem.

When users deposit their assets into the Mitosis Liquidity Protocol, they are issued corresponding miAssets at a 1:1 ratio (e.g. deposit eETH, receive meETH). These miAssets can then be utilized in a variety of DeFi activities. One of the options is depositing miAssets into DeFi protocols within the Mitosis Ecosystem. Once a DeFi protocol within Mitosis accumulates sufficient miAssets, it facilitates the corresponding cross-chain action. Let’s delve deeper into the flywheel of this mechanism.

  1. Increased liquidity supplied to the Mitosis Liquidity Protocol results in more miAssets on Mitosis Ecosystem

  2. As more miAssets are onboard on Mitosis, more liquidity is provided to DeFi’s within Mitosis Ecosystem

  3. When a certain DeFi accumulates sufficient liquidity, it unlocks the corresponding cross-chain action

    • Example 1: A DEX within the Mitosis Ecosystem with sufficient liquidity enables Mitosis Liquidity Protocol to facilitate cross-chain exchanges

    • Example 2: A lending-borrowing protocol within the Mitosis Ecosystem with sufficient liquidity enables the Mitosis Liquidity Protocol to facilitate cross-chain lending-borrowing

  4. As a result, the Mitosis Liquidity Protocol captures a larger segment of the cross-chain DeFi market, thereby making Mitosis a more attractive protocol to provide liquidity

  5. In turn, more liquidity providers decide to deposit to the Mitosis Liquidity Protocol, which loops back to the first point, creating a flywheel

For more details on this process, refer to the "Understanding Mitosis" section

pageUnderstanding Mitosis

As Mitosis continues to grow, it absorbs a wider range of cross-chain DeFi demands, which in turn attracts more liquidity. This makes the Mitosis Liquidity Protocol a catalyst for the modular era, scaling synergistically with the era's prosperity. Also, this expansive capability is precisely why we refer to the Mitosis Liquidity Protocol as a 'liquidity protocol' rather than a 'liquidity network’ - it enables all, not just cross-chain transfers.

Additionally, Mitosis's liquidity providers never have to forego other yield opportunities because they can utilize their mAssets in DeFi activities of their choice.

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