The Tokemak team has provided a glimpse into the function of Liquidity Management Pools, a major new mechanism in the upcoming Tokemak General Purpose (2.0) product overhaul.
"Pilots - Tokemak is ready to unveil some of the details around the first Liquidity Management Pool (LMP), launching as part of Tokemak GP. LMPs allow for the discovery and creation of a transparent Liquidity Rate for different market segments, starting with LMP-1 which will serve LSD liquidity. LMP-1 development is actively underway."
- LiquidityWizard (via Discord)
Tokemak GP, “General Purpose,” is a major v2 redesign of the protocol that aims to become a generalized liquidity network that may serve all token holders in crypto by matching the supply and demand for liquidity with predictable rate discovery.
The first Liquidity Management Pool (LMP-1) will serve liquid staking derivatives (such as frxETH, stETH, rETH, and other Ether LSDs). The aim is to establish a transparent rate for different market segments to create predictable on-demand liquidity.
Existing liquidity incentive schemes are unreliable and do not always have a direct impact on actual liquidity, but the Tokemak LSD Rate Pool aims to solve this problem by providing a known, deterministic rate called the LSD Liquidity Rate. Protocols aiming to expand the reach of their staking derivatives will be able to use this pool to bootstrap liquidity in a measurable and consistent manner.
Liquid staking derivatives are increasing in popularity due to the imminent Ethereum "Shanghai" network upgrade, which will enable ETH2 Beacon Chain withdrawals – marking a major milestone in finalizing Ethereum's transition to Proof-of-Stake following the successful migration off of the Proof-of-Work consensus mechanism last summer.