Liquidity Deployment
The working mechanism of OliveDAO
The below illustration depicts the working mechanism of OliveDAO deploying liquidity to an outside trading venue (while we will be focusing on automated market makers as these represent the main concern in regards to IL, the same general mechanics apply when liquidity is deployed to order book exchanges).
Working mechanism of OliveDAO
  • LPs provide one-sided liquidity to Quote Jars and Base Jars
  • LDs stake veOLIVE to the Asset Jar(s) and direct the liquidity to their chosen trading venue
  • The system determines the amount to be deployed according to the quantity of the asset held in the reserve (and the veOLIVE staked to the specific Jars)
  • Finally, the system draws appropriate quantities of both assets from the Quote Jars and Base Jars and deploys them as directed by the LDs
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