Providing Liquidity

Liquidity providers (LPs) can supply USDC to Vest’s unified liquidity pool and earn a share of trading fees generated by zkRisk. The incentive structure is carefully designed to minimize the player-versus-player (PvP) dynamics common in popular GMX-like pool-based markets, promoting a more stable, predictable yield and healthier market overall.

Incentive Structure

• Risk-Aligned Yield: LPs’ primary source of yield comes from trading fees. Crucially, LPs do not profit from aggregate trader losses, eliminating the adversarial relationship between traders and liquidity providers.

• Buffering Market Volatility: In volatile markets, sudden price swings ("spikes") can quickly wipe out liquidity in traditional pools. On Vest, when traders incur losses, those funds are first placed into a protection buffer that absorbs these sharp market moves. This buffer shields LP capital from sudden directional risks, ensuring that unexpected price swings don’t erase months of earned yield.

• Risk-Based Compensation: To protect against market risk, LPs receive a share of the risk premia and funding determined entirely by zkRisk’s risk assessments. This serves as an additional buffer to being the counterparty to traders.

Liquidity withdrawals require an 8-hour lock-up period, ensuring system stability while offering LPs flexibility. Withdrawal requests are processed after this period, providing a balance between liquidity access and platform security.