General flow

Liquorice is an infrastructure application that has two key components:

Lending pools tailored for intent based trading. Connected market makers may use borrowed capital when settling trades. The mechanism is fully integrated with settlement contracts, offering high capital efficiency for PMMs while providing LPs a transparent way to earn passive income

Offchain order matching. Liquorice is connected with solvers on core meta aggregators such as CoW swap, 1inch Fusion, and Uniswap X. We introduce a single entry API point for professional trading firms to provide liquidity across all core DeFi platforms

For example, here is what happens when pool is used during settlement with partial collateralization on Liquorice (PMM pays 1 ETH to trader against 4000 USDC, PMM pre deposited 800 USDC as collateral with 110% liquidation threshold, LP pre locked at least 1 ETH in lending pool)

• We receive signed order from trader and inform connected PMM about it specifying by what time solution must be found

• PMMs supply competing quotes. PMM may settle trade using their own capital or utilize lending pool which PMM may specify in signed order

• Assuming that PMM's quote won the auction, signed order is submitted in smart contract and signature is validated.

• 1 ETH is paid to trader’s wallet from the pool

• 4000 USDC is stored in the pool as collateral

• In smart contract we record a fact that PMM borrowed 1 ETH from the pool which he must return and his pre deposited collateral plus new tokens received support the collateralization (800 + 4000 USDC). LP receives a fee as percentage of trade notional and a time based fee.

• Liquidation service is in place to ensure safety of LP funds

• If PMM wins later on a trade which allows him to receive 1 or less ETH, he can repay existing debt with it in the same transaction