Directional Market Making

This is how LP are given unique choices for liquidity provision.

Flexible Liquidity

Ax11 empowers users to provide liquidity in any proportion, allowing for bullish, bearish, or "neutral stances" on a specific token, similar to Uniswap V2. Users can also provide single-sided liquidity, thanks to Ax11's separation of price curve from the liquidity curve. Each token pair, comprising token x and y, maintains independent liquidity constants for x and y, facilitating single-sided liquidity provision and enabling potential shorting positions.

For example, when users want to provide liquidity for an ETH/USDC pair, they have the flexibility to allocate their assets based on their market outlook:

1. Bullish on ETH: Users can allocate a higher percentage of liquidity to ETH, such as 80% ETH and 20% USDC, to reflect their expectation that ETH will outperform.

2. Bullish on USDC (Bearish on ETH): Users can allocate a higher percentage to USDC, such as 80% USDC and 20% ETH, prioritizing stability or hedging against ETH's potential decline.

3. Neutral (50/50 Allocation): Users can allocate 50% to ETH and 50% to USDC, following a balanced approach similar to the traditional Uniswap V2 formula.

This flexibility allows users to tailor their liquidity provisioning strategy to align with their market views and risk preferences.

Single side liquidity

Since AX11 separates the price curve from the liquidity curve, users can opt to provide single-sided liquidity. This approach functions similarly to taking a short position in trading:

1. If the Asset Price Decreases: When the price of the asset decreases, users will receive a larger amount of the token they provided, aligning with the benefits of a short position.

2. If the Asset Price Increases: Conversely, if the price of the asset increases, the amount of the provided token decreases, resulting in a loss similar to the downside of a short position.

This mechanism allows users to strategically allocate their liquidity based on market expectations while understanding the inherent risks and rewards of price fluctuations.

Allowing single-sided liquidity provisioning enables LP tokens to be split and utilized for a wider range of use cases, such as collateral for loans, options, bonds, and other innovative market opportunities. This flexibility empowers users to participate in DeFi markets more effectively while optimizing their asset utilization.