A liquidity provisioning model describes the method by which assets are made available for trading or exchange within a financial market, particularly in decentralized finance. These models dictate how users contribute capital to liquidity pools and how that capital facilitates trades. Examples include automated market makers or order book systems, each with distinct mechanisms for price discovery and trade execution. The model determines how efficiently assets can be converted.
Context
Liquidity provisioning models are frequently discussed in news concerning the design and performance of decentralized exchanges and other DeFi protocols. The efficiency and fairness of these models are key considerations for attracting users and capital. Understanding these models is essential for assessing the operational mechanics and economic incentives of various digital asset trading platforms.
The Zero-Fee Perpetual primitive fundamentally re-architects the DEX fee model, creating a capital-efficient environment that aligns protocol revenue with trader profitability, driving massive volume on Base.
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