Genesis Liquidity Pools

The GLPs are the entry point for users to the Geminon protocol, and constitute the basis of its operation. They allow users to obtain GEX tokens, which are required to access other features of the protocol, in exchange for depositing other tokens as collateral.

Despite their name, they are not liquidity pools; this naming is used for convenience, as it helps users to recognize the purpose of this module. A GLP presents several differences compared to a Uniswap-type liquidity pool:

  • There are no liquidity providers: instead, it is the pool itself that creates and destroys liquidity each time the asset used as collateral is deposited or withdrawn from the pool.

  • You cannot exchange any pair of assets: one of the two tokens in the exchange must always be the GEX token.

  • They are not isolated: they use information from the state of the other GLPs for their operations.

  • They allow a portion of the pool's assets to be lent on a term basis.

  • They can mint and burn the GEX token.

A GLP is a type of LBP (Liquidity Bootstrapping Pool), a variant of liquidity pools specialized in launching new tokens to the market with very low liquidity. LBPs were first described in 2020 by the Balancer protocol. The main difference with respect to a Uniswap-type liquidity pool is that an LBP does not follow a constant product liquidity curve, but uses a parametric curve that allows, for example, to execute a Dutch Auction (with a descending price) to launch a new token to the market, ensuring a fair distribution of it.

Given their characteristics, the GLP developed by Geminon have several advantages over a Uniswap-type liquidity pool:

  • Higher returns for GEX token holders: as there are no liquidity providers, all benefits from slippage of operations in a GLP are received by token holders.

  • Like an LBP, they allow tokens to be launched on the market without the need to provide a large initial liquidity, since it is the pool itself that creates the liquidity dynamically.

  • Control of the supply of the token, which in turn allows precise control of the price curve that helps to avoid exponential regimes at the extremes of the curve.

  • It allows to balance the weights of the collateral between different pools.

  • Greater security for users: the liquidity they contain cannot be withdrawn instantly: they do not allow "rug pulls".

  • Increased security for the protocol: The entropy capture feature of GLP makes operations that generate large price slippage in a pool, such as manipulations using flash loans, economically unfeasible for the attacker.

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