Public enterprise blockchain Orbs has announced the launch of a liquidity-as-a-service solution that enables users to participate in yield farming using a single token.
The product in question, Liquidity Nexus, seeks to incentivize both traditional cefi investors who prefer low volatility, and the defi degenerates who chase higher yield due to the excessive volatility of digital assets.
Orbs is calling the innovation single-sided liquidity, to reflect the fact that liquidity providers can, for the first time, stake in a pool using a lone token.
Participants from the world of centralized finance, meanwhile, will act as stablecoin providers and earn a share of the profits without taking the risk that their stake will decrease in value.
The defi proposition is advanced as a way of tapping into deep, cefi-sourced liquidity within the decentralized finance world, with Liquidity Nexus acting as a bridge between both systems.
With more traditional investors and companies looking to gain exposure to crypto-assets, particularly as a consequence of falling interest rates and Tesla’s recent buy-in, the Orbs team believes that its latest product is the smart solution.
Building a Bridge Between Cefi and Defi
The rapid rise of defi exchanges like Uniswap, and the preponderance of high-APY yield farms on multiple chains, has seen the value locked in decentralized finance soar into the tens of billions.
Liquidity mining gives users a chance to put their digital assets to work and generate returns for locking up asset pairs weighted 50:50. At least, that was the model before Liquidity Nexus was launched.
Whereas before liquidity providers would have to supply both tokens (ETH and USDC, say) to be eligible for a share of transaction fees, now defi users can stake just one while cefi investors handle the USD-pegged half of the pool.
Needless to say, the volatility of crypto assets, coupled with the risk of impermanent loss, is such that higher rewards are necessary to incentivize defi stakers.
However, this is not seen as a negative by Orbs due to the different risk profiles (and earning expectations) of investors on both sides of the fence.
The current outlook in terms of interest rates being what it is, cefi investors such as family offices, corporations and hedge funds could make a much healthier return through liquidity farming than by storing cash holdings in a bank.
And without having to expose a single cent on crypto’s notoriously volatile markets.
Liquidity Nexus also saves defi traders the trouble of re-allocating their portfolio every time they want to stake on a yield farm, which entails exposure risks and the prospect of slippage.
If traders are long ETH, for instance, they probably aren’t too keen on swapping a percentage of ether for a stablecoin pegged to the US dollar, purely for the purpose of short- or medium-term staking.
Many defi traders have a dim view of the dollar, to put it mildly – even if they won’t hesitate to swap into stables when the market turns ugly.
The single-sided liquidity model brings defi holders and traditional corporations into the same orbit, despite their fundamental differences. The question is, will enough cefi players come to the table to make Liquidity Nexus the next smash success in defi?
Orbs will certainly be hoping so. The Israeli company has enjoyed a breakout year in 2021, partnering with Binance to sponsor the DeFi.org accelerator, listing on KuCoin, and opening up staking services on Bithumb.