Guide for PMMs
This page describes core benefits of Liquorice for Private Market Makers
Unified Access to DeFi Order Flow
By doing a single integration with Liquorice, a PMM gains access to core intent-based trading systems, including CoW Swap, Uniswap X, 1inch Fusion, and Bebop. All quotes are passed to the PMM in a unified API format, and a single set of smart contracts is used to inform PMMs of settled trades.
Intent-Based Lending Pools
PMMs may utilize lending capital when settling trades while supplying only a small portion of the trade notional into locked collateral.
When supplying a signed quote, PMMs may specify the details of borrowing off-chain. This is done by simply configuring six numeric parameters:
Tokens to be received directly into the PMM's wallet.
Tokens to be transferred from the trader to locked collateral.
Tokens to be transferred from the trader to the lending pool.
Tokens to be paid to the trader from the PMM address directly.
Tokens to be paid from the lending pool to the trader.
Tokens to be transferred from the PMM address to the locked collateral to facilitate the trade.
Liquorice smart contracts validate these parameters and carry out lending and token transfers appropriately in a single transaction, eliminating the need for the PMMs to write their own logic for complex interactions with multiple settlement and lending contracts.
For example, this enables a PMM to facilitate a trade for 10,000 USDC against 4 ETH by supplying only $2,000 worth of collateral without the need to pay additional gas fees for flash loans.
Rebalancing of locked collateral
As Liquorice handles settlement and landing in one transaction, it adds a lot of flexibility in capital management. PMM's capital will never sit idle, even when it is locked as collateral to facilitate borrowing. Liquorice design allows a PMM to facilitate any trade which rebalances collateral without violating collateralization in a single transaction.
No Interest Rate Spikes
Most lending protocols implement sharp rate spikes to discourage high pool utilization. This is understandable as those protocols are built to be generalist in nature.
Liquorice pools, however, are used strictly by professional trading firms whose strategies are sensitive to rate spikes. Therefore, Liquorice rates are strictly capped. Liquidity providers may request PMMs to exchange LP tokens for actual crypto through the Liquorice RFQ engine, which gives PMMs an efficient way to unload their debt.
Borrowing Fees Linked to Funding Rate
All borrowing fees on stablecoins are linked to funding rate dynamics. This provides a clear PnL dynamic for PMMs who hedge their risks via perpetual futures supporting trading startegies in the long term.
Crosschain support
Second version of Liquorice will allow PMMs to hold capital on a single network while carrying out borrowing on any other supported chain.
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