User-owned liquidity refers to a model in decentralized finance (DeFi) where individual users provide their digital assets to liquidity pools, thereby contributing to the market depth of trading pairs. In return, these users typically receive a portion of the trading fees generated by the pool. This mechanism contrasts with traditional centralized market making.
Context
News frequently discusses user-owned liquidity as a fundamental component of automated market makers (AMMs) and the broader DeFi ecosystem, empowering individuals to earn returns on their holdings. The debate often concerns the risks associated with providing liquidity, such as impermanent loss, and the economic incentives required to sustain these pools. Regulatory scrutiny regarding decentralized liquidity provision is an ongoing and significant topic.
High-speed on-chain CLOBs have achieved CEX-grade execution, driving $1T+ in monthly volume and establishing a defensible network effect in derivatives.
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