“Liquidity” is a term that’s tossed around a lot in the context of DeFi, usually by projects promising to deepen, increase, or otherwise boost it. Illiquid markets, after all, are the scourge of DeFi traders, leaving them susceptible to slippage and thus reduced profits.
While low liquidity can blight even the most popular DeFi trading pairs, it is particularly pronounced with low cap cryptos: tokens whose minor market capitalization means shallow pools where slippage is all but inevitable. Fine if you’re swapping $100 of tokens, but if you’re a whale, it’s impossible to take up a position without moving the market.
XFai is a new project that’s focused on solving the problem of illiquid DEX pools, specifically those of low cap tokens that have traditionally struggled to achieve optimum liquidity levels. XFai defines small cap tokens as being any asset whose market capitalization is below $400 million – which currently applies to all but the top 170 crypto assets. Most of DeFi, in other words.
XFai is advancing a system for rewarding LPs of low cap tokens, thereby making it profitable to hold these assets and to provide liquidity for them. …