Protocol Owned Liquidity
One of Tetu's characteristics is to create an ever-increasing Tetu Liquidity position belonging to the protocol. This takes place through the capacity of TVL at work buyback TETU on the market. TETU bought back on the market are distributed at a rate of 45% to xTETU holders, 45% to Protocol Liquidity and 10% USDC to the Investment Fund.
The idea of generating liquidity through standard buyback flow emerged as a solution to the illiquidity problem of the TETU token, in the early days the total liquidity of TETU-USDC was a mere $20K. There was a need for a solution to the problem of low liquidity. So the Protocol Owned Liquidity solution was implemented after a vote by a DAO voting that decided in its favor.
The liquidity generation performance of the protocol was excellent, within a few weeks after the DAO voting the protocol had already accumulated a position of almost $30K of liquidity. What was most surprising about this liquidity generation measure is that it is a completely self-sustaining solution and the liquidity generation capacity of the Tetu protocol is completely linked to the productivity of TVL at work.
The more TVL at work, the greater will be Tetu's liquidity generation.

The liquidity problem

Low liquidity or limited liquidity was not a problem unique to Tetu. Many protocols face or have already gone through the challenge of generating liquidity, the most used solution is to incentivize the liquidity of native tokens with a high emission. While this solution is very popular and has the potential to attract liquidity to the protocol's native tokens in the short term, in the long term it poses problems as token emissions are reduced and the incentives to provide liquidity become less and less over time. With enough time, users find themselves in a situation where it is no longer attractive to provide liquidity and low liquidity or limited liquidity is again a problem for the protocol.

An innovative solution

As Tetu's liquidity generation is associated with TVL at Work's yield farming productivity it is expected that Tetu's liquidity will become even greater as Tetu's TVL increases. A very interesting feature of this liquidity generation system is that if TVL remains at flat levels, liquidity continues to be generated, if a lot of TVL is deposited in the Tetu protocol, even more liquidity is generated, and there are situations where TVL at work fluctuates downwards but the TETU buyback capacity is drastically increased due to the fluctuation of the TETU price, producing a huge liquidity generation even with a lower TVL at work.
Tetu's liquidity generation system creates liquidity in all market environments.
To check the protocol's TETU liquidity funds look for Fund Keeper LP Balance on the Stats page.


Protocol Owned Liquidity article on Medium.
Last modified 1mo ago