In our last blog post, we asked the community for feedback on what LeoStrategy has built, is currently building and is set to release going forward.
LeoStrategy has only just begun this journey of building a financial network for LEO. We've built LSTR which is equity in LeoStrategy's success, SURGE which is a fixed income onchain bond and our RWA Protocol which has released 3 Real-World Asset tokens on cross-chain.
With all of these releases, we've continually refined our technology. There is more than meets the eye when it comes to our products.
One question we saw from @trumpman was about the potential success of these products. We welcome feedback: even when its critical.
Growing the size of the market of our products is extremely important but it's not the only thing that matters when it comes to LeoStrategy.
Expanding the # of users involved in LeoStrategy product brings scale but it doesn't dictate whether we are successful or not with the products.
As Khal accurately said in a reply to Trumpman: the success of LeoStrategy's products is contingent on the dividends getting paid on the products.
And what makes the Dividends get paid in perpetuity? The profitability of LeoStrategy's products:
- Market Makers
- Services like @lstr.voter
- Services like sLEO Lending
LeoStrategy isn't just launching these products to get new users. We're also launching new profit centers with each release. This is a vital part of understanding the LeoStrategy model and what we'll focus on in today's post.
Market Makers: Volatility = Vitality
When a new product is released, we release a Market Maker for that product. Our Market Makers are Cross-Chain which means they operate on both Base & Hive-Engine.
Cross-Chain Market Making is extremely lucrative because the price of tokens on one chain are always diverging from the price of tokens on another chain.
By market making LeoStrategy's asset stack, we are able to deliver massive profits on a daily basis. The scale of these profits is dependent on the active trading / volatility of the assets.
More volatility = more arbitrage windows = more profits for LeoStrategy.
When LeoStrategy market makes an asset, we generate an instant profit. The revenue is used to pay dividends and any extra that isn't used for dividend yield on the assets is used to buy additional LEO and stake it in LeoStrategy's perma-staked vaults.
This allows LeoStrategy to continually scale our balance sheet which then leads to the ability to expand existing + future products because each product is collateralized (backed) by LEO held on our balance sheet.
Current Market Makers
The current market makers are market making the pools on Base and Hive-Engine. For all LeoStrategy tokens, there are 2 routes per token (Base Pool & Hive-Engine Pool). LEO has about 6 active pools.
We market make all of these pools and generate daily profits from doing so. The pools are constantly in flux which means that the market makers are always active. If you look closely onchain, you'll see just how active they are. Dozens of transactions are being conducted on a daily basis and bringing profits to LeoStrategy. On active trading days, we may see as many as 100+ trades!
New Market Makers: Order Book Virtualizer
Khal offered us a design for a new Market Maker that he had been thinking about and said that LeoStrategy should conduct the work to build it.
LeoStrategy has been building this rather complex market maker for the past several weeks. We are getting close to it being live. We believe it will be live in the next few days.
This new MM introduces a third element to the LeoStrategy and LEO token cross-chain markets.
We call this an "Order Book Virtualizer" because it takes the liquidity from Base pools and virtualizes it onto Hive-Engine Order Books.
Imagine this: the Base liquidity allows the MM to create 5 bids & asks. The 5 bids & asks are placed every few ticks on Hive-Engine.
When a user wants to trade LEO or any LeoStrategy asset, they can buy or sell directly on the order book and they will find relatively deep liquidity available for doing so.
This Market Maker was thought up by Khal because he felt like the order books are used more heavily than anyone anticipated. A lot of Hivers still look at Hive-Engine order books as opposed to the liquidity pools. This is good for LeoStrategy as it is a totally new venue for trading each token that isn't being heavily utilized at the moment.
LeoStrategy will be able to bring deep liquidity to all Hive-Engine order books for:
- LEO
- LSTR
- SURGE
- TTSLA
- TGLD
- TNVDA
By bringing this liquidity, we'll generate more arbitrage profits from this entirely new market maker that we operate.
This new market maker operates in addition to all of our other cross-chain market makers that operate in the liquidity pools.
This means that all of them will work synergistically. When one market maker hits a profitable trade, it creates volume in all of the liquidity pools (and now order books too). This leads to more frequent arb windows which = more frequent trading on all bots = more frequent profits for LeoStrategy.
We believe the virtualizer MM will lead to massive profits both for itself and for all the other MMs that we operate.
Conclusion: How LeoStrategy Products Succeed in All Market Environments
LeoStrategy products succeed in absolutely all environments because as long as there is trading activity, there is market maker activity.
Market Maker activity generates profits which leads to us purchasing more LEO.
The scale of users using our products simply leads to bigger profits. The profitability of our products is still high even at a small scale.
So while scale matters and we are certainly chasing it; it is far from a requirement for success.
The faster we can scale our model, the more LEO we pick up. That is our main driver to scale products & services as quickly as possible.
With the LEO price low and the entire crypto market in bear market mode, many are starting to question the LeoStrategy model.
Don't let FUD distract you from what LeoStrategy is building. We are here to build alongside the LEO team for the next 10 years+. We believe that a financial layer on top of LEO will succeed massively in the future as LEO itself continues to scale.
We will continue to release profitable products & services and use the profits to buy LEO each day. The LEO price is down? That is AMAZING for us. It means more cheap LEO to add to our perma-stake balance sheet.
Posted Using INLEO
Among the three you mentioned that would guarantee the dividends, market makers is the most elusive for me. How does @lstr.voter work? Is sLEO Lending already implemented? Maybe these questions can be answered as I finish the article. Or better if I ask @rafiki about these.
@askrafiki can you explain all that in details?
Strong work!! Keep it up!
Still a bit fuzzy on the mechanics of Market Makers, but I am close to understanding exactly how they work and how they collect arbitrage.
Thanks for the article!