Centralized Liquidity Protocols in the Sui and Aptos Ecosystems: An Analysis of Cetus

Cetus is a decentralized exchange and liquidity protocol in the Move ecosystem. It adopts an algorithm similar to Uniswap V3, constructing a centralized liquidity protocol and a series of auxiliary functions, aiming to provide DeFi users with the best trading experience and higher capital efficiency. At the same time, Cetus also utilizes the unique ecological characteristics of Sui to create some composable features that differ from traditional DEX.

Target Audience of the Exchange

The on-chain cryptocurrency trading market, although relatively small in scale, is growing rapidly. A notable characteristic of this market is that most assets belong to the categories of low liquidity and low market capitalization, and this is continuously increasing every day. In this context, how to better facilitate price discovery to attract liquidity has become a key prerequisite for the prosperity of on-chain trading. Therefore, the primary target of DEX services should be liquidity providers (LP).

The demand for LP varies in different trading scenarios. We can categorize on-chain assets into two types: mainstream assets (the top ten assets by trading volume on major public chains) and long-tail assets. The LP demand for these two types of assets differs.

• Mainstream LPs: Pursuing more fee income and less impermanent loss
• Long-tail asset LP: requires a more economical, controllable, and flexible market capitalization strategy

In the long run, the V3 model with higher capital efficiency is the future trend. However, due to differences in demand, Uniswap V2 and V3 can coexist in the market. Nevertheless, new players who can cater to both demands are bound to emerge in the market. In emerging ecosystems like Sui, Cetus is expected to become a stronger candidate.

Cetus: Pioneer of the Move Ecosystem

Cetus has currently developed a complete product line including Swap, permissionless Liquidity pools, and cross-chain bridges.

concentrated Liquidity

Cetus adopts a concentrated liquidity market-making algorithm similar to Uniswap V3. LPs can create multiple positions in the same pool by setting different price ranges to implement customized strategies. This method allows LPs to earn more trading fees and improve capital efficiency.

Permissionless Pool Creation

Cetus allows users to freely create liquidity pools, and project parties can launch new tokens on the platform without permission. This feature helps attract early projects and quickly establishes pricing power for long-tail assets.

Flexible trading fees

The platform offers multiple levels of trading fees (0.01%, 0.05%, 0.25%, 1%), allowing users to choose the most suitable rate based on the characteristics of different assets. This design encourages the market to seek optimal liquidity allocation solutions on its own.

Position Auto Management

Users can set take-profit orders and limit orders, and can also use third-party position managers to reduce the difficulty of Liquidity management, which is especially suitable for LPs of long-tail assets.

Composability

Cetus supports high levels of composability, allowing other projects to easily access its Liquidity through integration with the Cetus SDK. For example, the options project Typus within the ecosystem has achieved one-click hedging of long-tail assets by connecting to Cetus.

Cross-chain Bridge

The Cetus cross-chain bridge built on Wormhole supports secure and convenient cross-chain transfers of assets across nearly 20 public chains.

Token Economic Model

Cetus adopts the xToken economic model, allowing users to earn protocol revenue sharing by holding CETUS and xCETUS, ensuring the alignment of community and protocol interests.

Cetus Team Advantages

Behind Cetus is a DEX team with mature development and operational experience. Their Aptos version has already been deployed and is running stably. With product guarantees, strong ecological BD capabilities, and continuous operational narrative abilities, the Cetus team is expected to gain a leading position in CLMM infrastructure within the Sui ecosystem.

Innovations in DeFi Brought by Concentrated Liquidity Protocols

LP Automated Liquidity Management Protocol

These types of protocols can help LPs automatically execute market-making strategies, addressing issues when market prices exceed the strategy's range. They can also enable LP mining of unilateral assets, as well as issue liquid and re-mortgageable ERC20 LP tokens for LP providers.

New Type Gun Pool and Leverage Mining

Under the CLMM algorithm, professional institutions can implement more customized strategies. The gun pool can adopt a proactive and robust strategy to generate returns, which holds great value for large investors.

New Derivatives System

Under the CLMM system, how to construct derivatives that can hedge against LP market-making risks to alleviate the damage to LP interests caused by malicious project behavior is a direction worth paying attention to.

Summary

The Cetus team demonstrates mature product delivery capabilities, strong ecosystem business development capabilities, and operational abilities. They have a deep and unique understanding of the DEX product and track. Within a unique ecological track like Sui, Cetus has great potential to become an industry leader.