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Jan 1

The Liquidity Rate: Understanding the Market Price of On-Chain Liquidity

IntroductionIn traditional financial markets, the concept of liquidity is well understood: it represents how easily an asset can be converted to cash without significant price impact. However, in decentralized finance (DeFi), liquidity takes on new dimensions and complexities, particularly for assets designed to maintain price parity with another asset. This article introduces the concept of the "liquidity rate" - a market-driven equilibrium that emerges from the interaction between protocols...

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