Liquidity is bandwidth on Bankless

In other words, you can trade at the price of a market when there is deep liquidity. With thin liquidity, the price moves significantly as you interact with it. 

The decentralized economy will truly be unleashed.As we move towards a future with broadband liquidity, it becomes challenging to imagine what, exactly, that future looks like. While we know that deep liquidity will enable reliable pricing and less volatility, the implications are much more intriguing.

Tokemak is the unified liquidity layer of Web3, spanning across all DEXs, chains, and layers. It removes the friction for users to become Liquidity Providers, increasing liquidity bandwidth across the board. The diagram below shows how Tokemak functions. 

“Deep liquidity” means preserved value when trading between tokens. “Thin liquidity” means loss of value when trading between tokens.

Value transfer has replaced data transfer, and liquidity is the new bandwidth of the Web3 network. The issue is that the liquidity bandwidth is currently thin and unreliable. Take a look at how many tokens are currently sidelined, rather than being used as liquidity. The answer is a majority.

The outcome is that liquidity in DeFi is currently in a dial-up state. There is just not enough liquidity to enable and encourage transfers with low value loss.Additionally, the liquidity that exists is highly unreliable. Token projects generally incentivize their liquidity via inflationary rewards. This inflation-based liquidity is unsustainable a... See more

The above discussion may make it seem like only traders should care about liquidity. In Web3, this couldn’t be further from the truth. All users interact with liquidity, as all users need to move in and out of the tokens required to interact with a token-based economy. Similarly, all protocols need to interact with liquidity as they buy/sell and le... See more

Trying to imagine what will be built upon the coming deep liquidity bandwidth is as difficult as someone in 1995 with dial-up internet trying to imagine Netflix streaming videos to a mobile phone. The future innovation that deep liquidity bandwidth will unlock will be even more significant. 

In Web3—the internet of value—liquidity is the new bandwidth. Data bandwidth allowed communication to flow freely, but liquidity bandwidth enables value to flow freely.

The problem is that we’re still in the dial-up phase. Liquidity is fragmented and inefficient, there are barriers to entry, we use basic primitives like liquidity mining, and we’re only just discovering the potential.