Understanding Infusion Protocol’s Approach to Solidifying Liquidity
As a sequel to the previous article, it is now time to introduce Infusion Protocol, a revolutionary addition to the Base DeFi ecosystem. With its provable liquidity primitive, Infusion Protocol heralds a new era of stability, reliability, and composability. Join us below, as we explore the fundamental principles and transformative potential of Infusion Protocol.
What is Infusion?
Infusion Protocol is a new AMM protocol that facilitates deep and stabilized liquidity on Base. It features a critical time-lock component that allows for liquidity to be utilized as an onchain primitive for other DeFi apps to build on. Similar to other AMMs, Infusion offers various pool types, including stable and volatile, catering to different liquidity needs. Stable swaps are equipped with an efficient pricing model and a liquidity curve formula reminiscent of Curve, ensuring stability in the face of market volatility.
Provable Liquidity = Liquidity Fused With Time
Infusion Protocol solidifies onchain liquidity through a novel timelock component called Timefuse. When liquidity is “Timefused”, pools allocate a larger portion of fees to the liquidity providers with liquidity locked for a set period of time, incentivizing the longer term stability that DeFi needs. Infusion merges each user’s LP worth, timelock commitment, and expected LP fee income into an onchain primitive (provable liquidity) for apps that seek verifiable evidence of user asset value. Simply put, liquidity providers who timefuse their liquidity may earn more fees, while also establishing a stronger base layer for the entire DeFi ecosystem.
Provable Liquidity: A Simple Innovation with Rippling Benefits
So why is provable liquidity important to DeFi?
While the concept of locking liquidity has been utilized in DeFi before, it has not been used for optimizing predictability and stability in liquidity.
This new primitive of provable liquidity enables users to create a digital footprint of their onchain assets and earned fees, while locking in liquidity to support the larger ecosystem. As a result, provable liquidity is a new, more reliable metric than the existing liquidity measurements of current AMMs, since the liquidity in existing AMMS may be suddenly withdrawn at any time.
By combining dex liquidity with a time component, this liquidity allows DeFi apps to build the next generation of cutting-edge innovations that are only made possible by a stabilized liquidity source. This onchain primitive also opens the doors for web3 reputation, credit, or loyalty, enriching a wallet’s financial profile and history with verifiable information.
Protocol Contributors and Utilizing Base L2
Infusion Protocol is a community driven project with contributors and advisors from various DeFi and infrastructure projects. Core contributors and advisors have backgrounds from 1inch, Pendle Finance, Harmony, LI.FI and Thorchain.
Infusion is strategically aligned with Base, the Layer 2 incubated by Coinbase, for several key reasons:
- Suited for Mass Adoption: With Coinbase bringing over 100 million retail users onchain, Infusion is designed for easy adoption by the masses.
- Cheap, Fast & Accessible: Base offers fast transactions, EVM compatibility, and low transaction costs, providing an ideal environment for the growth of Infusion users.
- Creating a Stronger Base: As a newer chain, Base’s DeFi ecosystem stands to gain substantially from the increased stability of Infusion’s provable liquidity.
- Fostering Diverse Use-Cases: Solidified liquidity will help promote further innovation, from lending protocols to onchain reputation and credit. Many of these innovations are ripe to intersect with mass-adoption use cases — Base’s sweet spot.
Overall, Infusion will be positioned within the Base ecosystem to harness the growth of a burgeoning ecosystem driven by mass adoption and innovative developments in DeFi.
Conclusion
Infusion Protocol presents its simple, yet fundamental upgrade to Base, transforming the dex liquidity layer into a more solid and sound bedrock for innovation to foster. Infusion introduces a new and reliable primitive, called provable liquidity, which ensures that stability, predictability, and composability harmonize to strengthen the fabric of decentralized finance. The best of DeFi is still to come, and the next step of the evolution is here — it’s called Infusion Protocol.
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