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Key Takeaways
Cetus is a protocol for decentralized exchanges and liquidity systems. It’s built on the Sui and Aptos blockchains.
Cetus’ mission is to build a flexible and reliable liquidity network that makes trading easier and more efficient for DeFi users.
The Cetus protocol adopts a concentrated liquidity market maker (CLMM) model that can enhance capital efficiency by allowing liquidity providers to choose a narrower price range for their positions.
What Is Cetus?
Cetus is a decentralized exchange (DEX) and concentrated liquidity protocol built on the Sui and Aptos blockchains. Its main goal is to make trading smoother and easier for everyone by creating a flexible and strong network for market liquidity.
Cetus also aims to give decentralized finance (DeFi) users a top-notch trading experience and make liquidity use more efficient across the Web3 space.
Key Features of Cetus
Permissionless
Cetus allows anyone, or any app, to use its core tools and functions freely. For example, users can use Cetus to create new trading pools or set up custom liquidity-related services. No special permissions are needed to get started.
Programmable
Cetus is a flexible liquidity protocol based on a liquidity model known as Concentrated Liquidity Market Marker (CLMM). Users can set up all kinds of trading strategies, including more complex ones that are more commonly found on centralized exchanges. The CLMM model also allows liquidity providers to maximize their capital efficiency.
Composability
Cetus is built with integration in mind, offering “Liquidity as a Service.” This means developers can easily tap into Cetus’s liquidity for their own services, like creating vaults, derivatives, or leveraged farming products. Cetus’s software tools also allow new projects to quickly set up trading or swapping interfaces on their own pages.
Sustainability
The Cetus ecosystem uses a double-token model to ensure the long-term sustainability of the protocol. Such a model is designed to offer long-term rewards for those who contribute and actively participate in the network activities.
CETUS is the main native token and xCETUS is a liquidity staking token (LST) that represents staked CETUS.
Concentrated Liquidity Market Maker (CLMM)
In a standard automated market maker (AMM) model, liquidity is spread evenly across the whole price range. However, this often leaves most of the liquidity unused, especially in stablecoin pools where prices stay relatively stable.
In the concentrated liquidity market maker (CLMM) model, liquidity providers (LPs) can choose a narrower price range where trading activity is high, enabling them to earn more fees by putting their liquidity to better use.
In a CLMM system, each price range an LP chooses is called a position, and providers can set multiple positions within a liquidity pool to match their trading strategies.
When the market price moves outside a position’s range, that liquidity becomes inactive, meaning it stops earning fees until the price moves back within the range. This setup gives LPs flexibility to adjust their strategies based on market trends, possibly maximizing their returns by targeting active price zones.
Why Did Cetus Choose Sui and Aptos?
Cetus operates on the Sui and Aptos blockchain networks.
Sui is designed for high-speed transactions and instant settlements, making it great for apps that need quick responses. Its unique architecture also allows for creative new features in the Web3 space.
Aptos is a new blockchain with ambitions for speed, scalability, and resilience. As it grows, Cetus plans to be a key part of Aptos’s ecosystem, helping build a more efficient network.
What Can Liquidity Providers Earn on Cetus?
Liquidity providers on Cetus can earn incentives in a few different ways:
Transaction fees: Providers can earn fees based on active price ranges where their liquidity is used in trades. This is often LP’s primary method of earning.
Liquidity mining: LPs may get extra rewards based on their positions when collecting transaction fees in specific pools and price ranges. Liquidity mining generates specific NFTs that represent the position of liquidity providers.
Loyalty programs: Active participants may get extra incentives through loyalty programs like liquidity lockups and leaderboard events.
Cetus Tokens
Cetus has two tokens: CETUS and xCETUS.
CETUS is the main token of the Cetus Protocol, designed as an interoperable token to be used as a medium of exchange within the network. Users can earn CETUS through liquidity mining.
xCETUS is a non-transferable escrowed token that represents staked CETUS. Users can participate in the governance system of the Cetus network according to their voting power (defined by xCETUS holdings).
Closing Thoughts
Cetus is an innovative DEX on Sui and Aptos that adopts the CLMM model. Cetus aims to simplify trading by building a flexible and powerful liquidity network with tools that can provide a smooth trading experience and efficient liquidity use for DeFi users.
Further Reading
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