Native’s Programmable Liquidity: Solving DeFi’s Pricing Inefficiencies

Native Labs
5 min readMar 25, 2024

Step into the future of DeFi with Native’s new product Aqua, where capital efficiency meets maximum yield. Aqua is Native’s revolutionary liquidity hub designed to unite these two critical aspects of decentralized finance, providing a platform for market makers, liquidity providers, and retail traders alike.

What is Aqua?

Aqua is introducing a 100% new DeFi primitive, disrupting the DEX ecosystem. Aqua allows Market Makers (MMs) and Solvers to engage in credit-based trading by leveraging funds in Aqua’s liquidity pool. This innovative approach enables Market Makers to offer more diverse pricing strategies, which in turn boosts capital efficiency and maximizes returns with leverage.

How does Aqua work?

Let’s look at the journey of a swap facilitated by Aqua. Traders start the process by initiating a request routed through the Aqua platform.

Market Makers promptly receive these requests, armed not only with their personal inventory but also with the vast liquidity available in the Aqua’s ecosystem. This marks a groundbreaking moment where Market Makers can leverage on-chain credit, thanks to Aqua’s expansive liquidity pool.

Retail investors participate by depositing their funds, reaping high yields generated from the fees accrued by Market Makers.

In offering prices, Market Makers can assume either long or short positions, thereby amplifying their trading activities without the need to post all the upfront investment.

Aqua seamlessly integrates trading, liquidity, and credit into a unified system, as depicted in the flow chart. This fosters efficiency and profitability within the DeFi landscape.

How is the credit calculated?

Market Maker and Solvers deposit collateral into the pool, determining their initial credit. For example, if they contribute 1000 USDC, their credit would be 800 (assuming Max LTV for USDC is 80%). Assuming a transaction occurs where a user swaps 1 ETH for 2000 USDC, the credit has not been utilized at the exact moment of the transaction.

However, 0.1 seconds later, if the price of ETH drops from 2000 to 1800 USDC, the credit usage is calculated as follows:

(Mark-to-market value of all short positions + financing fee) — (Mark-to-market value of all long positions)

In this case, it would be $2000 + 0.5–1800 = 200.5. Therefore, the credit line usage is 200.5/800 = 25.06%.

Aqua monitors users’ credit lines before each transaction, and if it reaches the credit limit, we initiate the liquidation process for their positions.

Fixing Pricing Model Inefficiencies

Market Makers, with their nuanced strategies and depth of market understanding, inherently offer more efficiency compared to DEX pricing. Giving Market Makers access to additional funds via Aqua’s leverage enhances their ability to offer competitive pricing across a wide range of assets. By increasing capital, Aqua can facilitate superior pricing from Market Makers, attract more traders, and further solidify Native’s position as a market leader.


For Market Makers: A Leap in Efficiency and Profitability

Market Makers will have access to Credit-Based Trading to Supercharge their pricing. Aqua provides a chain-agnostic credit system to increase efficiency and streamline operations drastically. By focusing more on strategy rather than being bogged down by immediate liquidity, Aqua opens up avenues for greater profits and flexibility.

For Liquidity Providers: Sustainable High Yields

Liquidity Providers will maximize their yields by depositing funds with Aqua. Aqua will have incredible yield opportunities powered by market-maker financing fees. Unlike fleeting yield opportunities on other platforms, Aqua provides a sustainable profit-sharing model, ensuring that your earnings are not just substantial but also lasting.

For Retail Traders: The Gateway to Optimal Pricing

Retail Traders will have access to competitive pricing on a wide range of assets through NativeX and other DEX aggregators. Aqua’s credit-based system ensures market makers can offer the best prices, making trades more profitable.

Why Aqua? A New Era in DeFi

Streamlined Access for Market Makers

With Aqua’s innovative credit-based trading, Market Makers can seamlessly switch between CeFi and DeFi, allowing quick adaptation and efficiency in their market-making activities.

Unmatched Yield Potential for Liquidity Providers

With Aqua’s liquidity pool, Liquidity Providers can reap high rewards for their contributions, enabling the growth of both market makers and the broader DeFi market.

Premier Trading Opportunities for Retail Traders

Because Aqua enables more efficient pricing through Native’s advanced Request for Quote (RFQ) model, Traders will get the best prices minimizing slippage and maximizing efficiency.

Aqua’s Commitment to Safety and Security

Credit Requirements

Aqua’s Credit Management is meticulous, balancing rigorous off-chain assessments with on-chain data to ensure credit health. In the event of credit risk, Aqua’s mechanism for liquidation mirrors that of established platforms like Compound, with oracles providing price data for quick and fair liquidation processes, maintaining the ecosystem’s integrity.

Security Audits

Aqua has been rigorously audited by industry leaders such as Salus, Veridise, and Halborn, ensuring a secure and trustworthy environment for all your DeFi activities.

In addition, Native will soon launch a major bug bounty program with Immunefi, the leading bug bounty program platform on Web3.

Frequently Asked Questions

How does Aqua differ from other DeFi platforms?

Aqua transforms market participation with minimal capital requirements and unparalleled flexibility thanks to its innovative credit and liquidity frameworks.

Can retail investors use Aqua?

Absolutely. Retail investors enhance the platform’s efficiency and can earn sustainable yields by providing liquidity, fostering a healthier ecosystem.

What makes Aqua’s pricing mechanism superior?

Our RFQ model facilitates more efficient capital usage and tighter spreads, directly connecting buyers and sellers for better pricing.

Aqua represents not just an evolution but a revolution in DeFi, combining the best of CeFi’s efficiency with DeFi’s innovative spirit. Join us as we embark on this journey to redefine decentralized finance.

Ready to try Aqua?

Follow us on X and check Aqua here.

  • 1st Phase — March: Aqua launches with zkLINK on March 20th.
  • 2nd Phase — April: Aqua will be in closed beta with selected partners and KOLs.
  • 3rd Phase — June: Aqua will launch to the public.



Native Labs

Native is a mesh network of programmable, project-owned DEXs, connected by a shared liquidity layer.