How it works
PALM helps protocols bootstrap liquidity, without having to conduct any liquidity mining or OTC deals (e.g. bond sale), but rather through active market making on UniV3. PALM sets UniV3 positions to be able to average in and out of base assets or governance tokens, with an aim to help protocols get equal liquidity on both buy and sell side. Instead of having to provide liquidity between governance token and base asset in a 50:50 ratio, projects can seed the initial liquidity in any ratio, e.g. 95:5, and PALM will progressively pull it towards 50:50. After having acquired a robust amount of base asset, the focus then is to ensure sustainable and deep liquidity that can support the ongoing trading volumes around the current price.
If a protocol provides majority of the initial liquidity in its governance token, e.g. in a ratio of 95:5 between governance token and base asset, equal buy and sell side liquidity would mean more base asset to be "bought". First, a 3-range setup can be created around the current price of the governance token, as illustrated below.
If the price P moves up over the dotted line in R, PALM will eject the gained base asset out of the LP position and keep them under the Inventory Management. It will then shift all ranges along the price movement in a similar setup around the new price. The process is the same, but only the other way around if price P moves down below the dotted line in L. This takes place on any price movement that surpasses the predefined size.
Last modified 5mo ago