Decentralized Liquidity with Chia Offers

Why TVL is not a metric for dexie

In this post we describe liquidity on Chia offer aggregators, such as dexie. If you are unfamiliar with either of these, we suggest to head over to Chias Offer documentation and the dexie docs first.

TVL represents the total value of assets locked in a DeFi protocol or smart contract. It has become a popular metric for gauging the success of various projects.

With Chia offers we don’t really have project TVLs. Offer liquidity can exist on multiple exchanges (aggregators) simultaneously. The whole Chia ecosystem has access to the same cumulative liquidity, all without any protocol fees. This enables real decentralized liquidity, that no one owns.

Market makers stay in full control of their funds at all times and are not bound to a specific protocol. They can provide the same liquidity to multiple offer aggregators at once or even for multiple pairs at the same time (eg. offering the same XCH coin for both DBX and SBX). They can leverage Chia's custody primitives, such as vaults, and have the option to withdraw their liquidity completely simply by using (spending) their coins, thereby invalidating all outstanding offers.

We expect that wallets will, by default, push created offers to most aggregators automatically, and aggregators will share those offers with each other, resulting in faster offer completion and a more efficient DeFi ecosystem. In addition, liquidity incentives, like those found on dexie, not only incentivize liquidity on dexie but also, in theory, incentivize the entire offer ecosystem.

The beauty of all of this is that it happens off-chain and can scale massively. Receiving and indexing offer files is essentially Web 1.0 technology, proven for decades. Along with expiring offers that don't require a cancellation transaction, it's possible to create reactive order books not bound by any blockchain limits. Only the offer settlement needs to happen on chain.

Offer aggregators such as dexie can thrive by providing the best interface, tools and APIs for managing offers, but they cannot depend on their liquidity, as any other aggregator can simply index the same offers. However, this also implies that dexie can benefit from the growth of other aggregators.

TVLs are a useful metric for collateralized protocols like Circuit DAO, or for AMMs like TibetSwap. One could try to measure a TVL across the whole Chia offer ecosystem but TVLs are not relevant to individual offer exchanges/aggregators which have shared liquidity based on Chia offers.

Offers really enable a new approach to DeFi liquidity and those unique advantages are precisely why we choose Chia for dexie. 🦆

If you want to stay up to date with all things dexie, check out our brand new @dexie.space account on bsky.app!