PLUTOS NETWORK’S INFINITE LIQUIDITY
Infinite Liquidity & Synthetic variety by Staking & Minting
Plutos Pool is a pool built by PLUT holders staking their coins and minting assets like as pUSD, pBTC, and pETH. When trading pUSD to pBTC, for example, the pool operates as a liquidity provider and acts as the counter-party. As a result, the liquidity might be considered to be unlimited. In other words, users do not need to be concerned about the lack of liquidity or slippage that can be found in traditional financial markets.
But what happens with price fluctuations ?
If all users only have pBTC and the price of BTC grows by 50%, the total debt also climbs by 50%. The staking pool, in this example, has the opposite position, pBTC sell (or inverse piBTC), therefore the buy/sell ratio is significant in the overall collateral ratio of the system. The Plutos Network will improve system stability by lowering the risk of various approaches, such as position hedge in the on/off chain, for the system’s position imbalance.
Use Case Considerations
The use cases are greatly broadened under such a framework, including but not limited to: natural hedging, short and long positions, low-friction global carrying trading, the global interest rate market, and the global foreign exchange market. To better discuss these concepts, we’ll be considering them one at a time;
- Natural Hedging: In this case scenario, foreign exchange rate risks are not borne by the borrower. This is beacause Bitcoin miners in Europe incur expenditures and invest in fixed assets in Euros, and as such the US dollar becomes of less use for them. European miners can now protect themselves against currency risks by collateralizing Bitcoin or Ethereum and lending EUX. This is also true for dealers who settle their winnings in euros.
- Short and Long Positions: Multi-currency stablecoins make it easier for traders to invest in the forex market. For example, if a trader is negative on the US dollar but bullish on the Euro, he can lend the USD and exchange it for the EUR.
- Global Foreign Exchange Market: With the rising demand for multi-currency stablecoins, there will be a proportional growth in liquid currency pairings. This will ultimately result in the formation of a multi-currency global foreign exchange market.
- Low-friction Global Carrying Trading: Although the liquidity mining benefits of USD stablecoins are appealing to depositors in the eurozone with negative interest rates, the frictional costs of carrying out carry transactions remain significant. The transaction party must first convert the euro into USDC or USDT, which may incur additional transaction costs and foreign exchange risks. The EUX currency pair will successfully minimize friction costs while also making it easier for Euro holders to participate in liquidity mining and other DeFi protocols.
- Global Interest Rate Market: Because market supply and demand are in constant flux, interest rates on the USX and EUX will fluctuate as well. This should bring about a thriving global interest rate market.
In conclusion,
Plutos Market provides a better trading experience by minimizing friction, slippage, and increasing the accessibility of popular crypto assets, among other things.
When people trade synthetic assets, the lack of an order book in Plutos Market provides better deals. Real-time pricing will be assigned to assets via on-chain and off-chain pricing feeds from oracles such as ChainLink and Umbrella, and these assets will be easily converted. Because of the high quantity of the collaterals posted in Plutos Market, it may avoid concerns like slippage by providing limitless liquidity and on-chain trading.