Decentralized Finance (DeFi) has been one of the most popular and prolific niches in the crypto world in recent months but has suffered from scalability and performance issues as demand continues to grow.
However, this demand is an issue originating from the existing blockchain networks used for the most popular DeFi Platforms but there are other aspects of DeFi that have not been addressed yet and have to do with their financial models.
One of these aspects is the model of liquidity used by most markets.
The Need for a New Approach to Liquidity
The tokenization of assets has been one of the greatest benefits of blockchain technology and cryptocurrencies, driving niches like Decentralized Finance (DeFi) and Non-fungible Tokens (NFT) to be one of the most successful industries in the crypto ecosystem in recent months.
However, this tokenization has been primarily based on the Ethereum network, which has caused a lack of standardization for tokenized assets that have made it harder for different platforms and networks to guarantee liquidity for their assets.
This lack of liquidity not only increases the risk of volatility for big and small investors alike but also results in lower efficiency and higher premiums as tokenization is fundamental when it comes to allowing speculation on non-liquid assets.
Existing Decentralized Finance projects have largely made use of a free movement liquidity model to allow for quick transfer of crypto assets in investing strategies, which has, in turn, resulted in the market being more attractive to investors looking to generate gains on their capital.
While this approach has proven to be successful to some degree, it has prevented tokenized assets from achieving a natural price discovery due to high levels of speculation and market uncertainty.
Open Vesting Liquidity (OVL) is a new model that…