# Water (DEFI)

> Liquidity Pool = A water reservoir and a water distribution system.

**Published by:** [MOVE](https://paragraph.com/@movementnetwork.base.eth/)
**Published on:** 2026-01-27
**URL:** https://paragraph.com/@movementnetwork.base.eth/water-defi

## Content

Imagine your movement as a big city. In this city, people can only live (trade) if there is water (Liquidity).Main Reservoir (LP) ETH (Infrastructure L1): This is the “main dam”. It is like a natural lake outside the city. It is strong, large, but it is difficult to reach every house in the city directly. WETH (ERC20 Standard L2): This is “purified water”. The main reservoir is packaged with a standard so that it can be used in the city’s pipelines (L2 Network). (L1 water is converted to L2 pipes). Pipeline Systems (V1 to V4 Evolutions) V1 (TVL - Single Reservoir) Model: Everyone pours into a large reservoir. How it works: It only looks at how much water is in the tank (TVL). Anyone who wants to get water just comes and draws it with a cup. If there is less water, the price goes up, if there is more water, the price goes down. It's a very simple old pipeline. V2 (MOVE/WETH - Two water pipes) Model: Two pipes are connected to each other. (MOVE pipe and WETH pipe). How it works: If you want to get MOVE water, you have to pour WETH water back in. The price is set based on the ratio of the water volume in the two pipes (50/50). V3 (MOVE/ETH - Smart Water Tap System - NFT ERC712) Model: This is called "Concentrated Liquidity". I installed a digital meter on the tap. Secret: Previously, it was wasteful to distribute water throughout the tank, so I set the price to "I will sell my water for between 10 and 20 ETH". NFT (ERC712): This is your "water ownership". How much do you have, All the information about where the water is being distributed. V4 (MOVE/ETH + Hook Address - Automatic Water Distribution Plant) Model: This is the most advanced. "Smart Valve" (Hooks) are installed in the pipeline. What is a Hook Address? (The Magic Valve) The Hook Address you are asking about is not a "wallet" or a "person". It is a "smart contract". What does it do? - When water (Tokens) flows through the pipe, it checks "Wait a minute... is the water flowing fast?" and "Who is this going to?" and then automatically performs some work (such as deducting taxes, separating it into another pipe). How do you get the Service Fee? - When the water flows, the Hook catches the water droplets. The Hook routes these Service Fees to the designated wallet (Creator Wallet) automatically. The Master Loop Start: Take ETH (L1), convert it to WETH (L2) through the Movement Bridge. (Put it in the pipe from the pond). Middle: Water is pumped into the V4 pipeline. Since you are the Creator, you install an automated head called Hook. How it works: Every time people exchange MOVE for ETH (Swap), Hook takes the service fee from the middle and sends it to you. End: Your NFT (ERC712) proves that you are a "major shareholder" of this water supply business. If you can install the Hook (automated factory) in the built pipeline (V4), the more people use (trade) the water, the more service fees you will receive.

## Publication Information

- [MOVE](https://paragraph.com/@movementnetwork.base.eth/): Publication homepage
- [All Posts](https://paragraph.com/@movementnetwork.base.eth/): More posts from this publication
- [RSS Feed](https://api.paragraph.com/blogs/rss/@movementnetwork.base.eth): Subscribe to updates