# Cetus Finance

By [Cetus Finance](https://paragraph.com/@cetus-finance) · 2022-09-11

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_Disclaimer :_ **_Although Liquid Finance strongly influenced Cetus Finance, don't think of it as a Liquid Finance fork since they haven't made their smart contracts accessible to the public._**

As of today,**providing** liquidity in the **DeFi** is now rather unappealing. Liquidity Pair (LP) investors face a variety of hazards, including Impermanent Loss and opportunity cost, which are not adequately compensated by the transaction fees charged for their service. Others event profit from decentralized liquidity through Miner/Maximal Extractable Value (MEV), while LP holders are the ones who are taking all the risks.

As a result, **Cetus** **Finance** has developed a solution that is heavily influenced by Liquid Finance. The **Cetus** **Finance** **Protocol** will run on two distinct tokens: **cETH** and **CETUS**. The principal token (cETH) which the protocol can mint and redeem and will be linked to the price of ETH.

![Arbitrage Illustration](https://storage.googleapis.com/papyrus_images/0a4b32a881ceba7a4c5e1a517de79a7cc330e723be3de88c05253db5a5b7ac9c.png)

Arbitrage Illustration

**Cetus** **Finance** Treasury will hold multiple assets paired with _cETH_, such as WETH,LINK and WBTC. When the price of these changes in relation to the price of _cETH_, we can arbitrage our pairs and extract MEV, which will be distributed to $**CETUS** holders.

The **Cetus** **Finance** **Protocol** can entirely renormalize the market price of _cETH_. This is due to the fact that only the protocol has the ability to increase and shrink the quantity of cETH within the **Cetus** **Arbitrage** **Mechanism** (CAM) and, as a result, repeg the token to ETH without generating market inefficiencies elsewhere.

*   When **cETH** exceeds the PEG, the protocol mints **cETH** using the assets of the reserve and sells it until it reaches the PEG. The profit is added to the reserve together with the **ETH** used for minting.
    
*   When **cETH** falls below the PEG, the protocol uses the assets of the reserve to buy back **cETH** until it reaches the PEG.
    

_By capturing the disparities between PEG and Market Prices, both strategies generate revenues that benefit to the Cetus Finance Reserve._

We are confident that our protocol will contribute to the development of a truly decentralized financial system and the expansion of the Arbitrum® Layer.

You can join us on [Twitter](https://twitter.com/CetusFinance_) or [Discord](https://discord.gg/WRB9As6e) to be aware of our latest news.

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*Originally published on [Cetus Finance](https://paragraph.com/@cetus-finance/cetus-finance)*