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.
For more information, read the full announcement on Discord, and catch up on February's State of the Reactor call in which the team discussed Tokemak GP!