Centralized Liquidity Protocol in the Sui Ecosystem: An Analysis of Cetus

Cetus is a decentralized exchange and Liquidity protocol based on the Move ecosystem, built with a centralized Liquidity protocol and related functions using an algorithm similar to Uniswap V3, providing DeFi users with a high-quality trading experience and greater capital efficiency. At the same time, Cetus leverages Sui's unique ecological characteristics to develop composable functions that differ from Uniswap.

Target Audience of the Exchange

The on-chain crypto trading market, although small in scale, is growing rapidly. The main characteristics of this market are that most assets belong to the low liquidity and low market capitalization categories, and there is a constant influx of new assets each day, with strong demand for price discovery. In this context, how to better facilitate price discovery to attract liquidity is key to the prosperity of on-chain trading. Therefore, decentralized exchanges should primarily serve liquidity providers (LP).

The demand for LP varies in different trading scenarios. On-chain assets can be divided into two categories: mainstream assets (the top ten assets by trading volume on major public chains) and long-tail assets, each having different LP demands.

• Mainstream LP: Pursue more fee income and reduce impermanent loss (Uni V3 is more suitable)
• Long-tail asset LP: requires a more economical, controllable, and flexible market cap strategy (Uni V2 is more convenient, Liquidity management costs are low)

In the long run, the capital-efficient V3 is the trend, but due to the differences in demand, Uni V2 and V3 can still coexist in terms of data. However, a market will inevitably emerge that can meet both demands simultaneously. In emerging ecosystems like Sui, Cetus is expected to become a stronger competitor.

Cetus: The first centralized liquidity protocol Dex in the Move ecosystem

Cetus has currently launched a complete product line including Swap, 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 change, the smart contract consumes the available liquidity within the current quoted price range until it reaches the next price Tick, and then immediately switches to the new Tick, activating the new liquidity. The Tick interval is related to the trading fee level; the higher the fee, the smaller the Tick point interval.

By concentrating liquidity, LPs can earn more trading fees and achieve higher capital efficiency.

Permissionless Pool Creation

Cetus allows users to create liquidity pools without permission, and project parties can directly launch new tokens on the platform. This helps attract early projects and quickly establish pricing power for long-tail assets.

Flexible trading fee

Cetus offers a choice of custom trading fee tiers, currently set at 0.01%, 0.05%, 0.25%, and 1%. This design encourages the market to seek the most suitable Liquidity allocation plan on its own, providing greater flexibility for LPs and trading users.

Position Auto Management

Users can implement take-profit orders and limit orders through range orders. Additionally, users can manage through a third-party position manager integrated with Cetus, reducing the difficulty of liquidity management and facilitating long-tail asset LP.

Composability

Cetus supports high composability, allowing other project teams to integrate the Cetus SDK to establish exchange interfaces on their own front end, enabling quick access to Cetus's Liquidity.

Cross-Chain Bridge

The Cetus cross-chain bridge built on Wormhole went live last November, allowing users to securely and conveniently transfer assets across 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 alignment of community and protocol interests.

Advantages of the Cetus Team

Behind Cetus is a Dex team with mature development and operational experience, and its Aptos version has been deployed and is running stably. With product guarantees, strong BD capabilities within the ecosystem, and continuous operational narrative ability, the Cetus team is expected to achieve a leading position in CLMM infrastructure within the Sui ecosystem.

Innovations in DeFi Brought by Centralized Liquidity Protocols

LP Automated Liquidity Management Protocol

This type of protocol can help LP automatically execute market-making strategies, as well as achieve unilateral asset LP mining and issue ERC20 LP tokens for LP providers.

New Gun Pool and Leveraged Mining

Under the CLMM algorithm, professional quant institutions and market maker teams can implement more customized strategies. The gun pool can obtain funds from protocol users or lending protocols, adopting a proactive and stable strategy to generate returns.

New Derivatives System

Under the CLMM system, how to construct derivatives that can hedge against LP market-making risks to alleviate the damage to LP interests caused by malicious dumping is a track worth paying attention to.

Summary

The Cetus team has mature product delivery capabilities, strong ecosystem BD capabilities, and operational capabilities. They have a deep and unique understanding of the DEX product and track. Within a unique ecological track like Sui, Cetus has high potential to become a leading project.