Centralized Liquidity Protocols in the Sui and Aptos Ecosystems: In-Depth Analysis of Cetus

Cetus is a decentralized exchange and liquidity protocol based on the Move ecosystem. It adopts an algorithm similar to Uniswap V3 to build a concentrated liquidity protocol and offers a range of ancillary features aimed at providing DeFi users with the best trading experience and higher capital efficiency. At the same time, Cetus leverages Sui's unique ecological characteristics to develop some composable features that differ from traditional protocols.

Target Audience of DEX

The on-chain cryptocurrency trading market, although relatively small in scale, is growing rapidly. A notable feature of this market is that most assets belong to the low liquidity, low market capitalization category, and a large number of new assets emerge daily, creating a strong demand for price discovery. In this context, how to better conduct price discovery and attract liquidity has become key to the prosperity of on-chain trading. Therefore, we believe that DEX should primarily serve 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 Asset LP: Pursuing higher fee income and less impermanent loss (Uniswap V3 is more suitable)
• Long-tail asset LP: requires more economical, controllable, and flexible market-making strategies (Uniswap V2 is more convenient, with lower liquidity management costs)

In the long run, the V3 model with higher capital efficiency is the trend, but due to the differences in demand, Uniswap V2 and V3 still coexist in the market. However, new players that can meet both demands will inevitably emerge in the market. In emerging ecosystems like Sui, Cetus is clearly a strong contender.

Cetus: The First Centralized Liquidity Protocol DEX of the Move Ecosystem

Cetus has currently developed a complete product line including trading, 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 within the same pool by setting different price ranges to implement customized strategies. As prices fluctuate, the smart contract will consume the available liquidity within the current quoted price range until it reaches the next price Tick. This mechanism allows LPs to earn more trading fees and improve capital efficiency.

Permissionless Pool Creation

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

Flexible trading fees

The platform supports multiple trading fee tiers (0.01%, 0.05%, 0.25%, 1%), allowing users to choose the appropriate rate based on the characteristics of different assets. This design encourages the market to find the best Liquidity distribution scheme on its own, providing greater flexibility for LPs and trading users.

Position Auto Management

Users can achieve profit-taking and limit orders through range orders. In addition, third-party position managers can be used for management, reducing the difficulty of Liquidity management and facilitating long-tail asset LP.

Composability

Cetus supports high composability, allowing other projects to easily establish trading interfaces on their own frontend by integrating the Cetus SDK and quickly access Cetus's Liquidity.

Secure Cross-Chain Bridge

Cetus, based on Wormhole, develops a cross-chain bridge that supports secure and convenient cross-chain asset transfers for nearly 20 public chains.

Token Economic Model

Cetus adopts the xToken economic model. Users can earn protocol revenue sharing by holding CETUS tokens and xCETUS, ensuring that the community's interests align with those of the protocol.

Advantages of the Cetus Team

Behind Cetus is a DEX team with rich development and operational experience, and their Aptos version has been deployed and is running stably. With product assurance, strong ecological BD capabilities, and continuous operational narrative capabilities, the Cetus team is expected to achieve a leading position in CLMM infrastructure within the Sui ecosystem.

DeFi Innovations Driven by Concentrated Liquidity Protocols

LP Automated Liquidity Management Protocol

This type of protocol can help LPs automatically execute market-making strategies, addressing the issues faced when market prices exceed the strategy's range. They can also enable unilateral asset LP mining and issue liquid, re-mortgageable ERC20 LP tokens for LP providers.

New Machine Gun Pool and Leverage Mining

Under the CLMM algorithm, professional quantitative institutions and market makers can implement more customized strategies. The gun pool can adopt an active and robust strategy to generate returns, which holds significant value for large-volume users.

New Derivative System

In the CLMM system, how to construct derivatives that can hedge against LP market-making risks, to buffer the losses of LP interests caused by malicious project dumps, is a direction worth paying attention to.

Summary

The Cetus team has demonstrated mature product delivery capabilities, strong ecosystem BD capabilities, and operational capabilities. They have a deep and unique understanding of the DEX product and sector. In a unique ecological track like Sui, Cetus has great potential to become an industry leader.