Lava will launch a decentralized credit market to facilitate liquidity in the blockchain

Decentralized credit market platform Lava has announced its launch on March 7.

Lava Infrastructure's Automated Market Makers (AMMS) Liquidity Space will enable seamless liquidity management and facilitate liquidity across multiple blockchain networks, according to a March 7 press release shared with Cointelegraph.

According to John Lo, Managing Partner of Digital Assets at Recharge Capital, decentralized exchanges are an ongoing loss issue for all liquidity providers. He told Cointelegraph.

“Not only is this a huge pain point for consumers, it's an issue that has caused changes in traditional architectures and prevented efficient markets across the chain.”

Persistent losses, seen as one of the biggest weaknesses of decentralized finance (DeFi), occur when the value of a token fluctuates after someone deposits it into a liquid pool-based automated market maker as part of a commodity farm – a type of investment. Lends tokens to earn rewards (not the same as saving). It is one of the main reasons why institutional investors are hesitant to invest in DeFi.

According to Lo, the ability to mitigate unending losses will open up a new paradigm for decentralized finance (DeFi) protocols.

“[This] As opposed to reverting to traditional financial architecture, DeFi opens up a new dimension where it democratizes market making and markets production and capital efficiency to compete with centralized locations. Alternative market makers (AMM) offer different benefits over traditional architectures and LAVA finishes, if these benefits are not identical.

Backed by Recharge Capital, Lava's new platform aims to empower liquidity providers and create greater crypto market depth, which refers to the market flow of a crypto asset or security based on the number of fixed buy and sell orders.

Lava claims it is the first platform in DeFi that aims to address unsettled liquidity, coordinating arbitrage between market maker prices and lending liquidity positions.

The platform enables users to arbitrate between DeFi and centralized finance (CeFi) protocols to achieve an effective market rate and facilitates product optimization for active liquidity providers.

Lava is a multi-chain platform currently available on Arbitrum and Base blockchains. The protocol plans to extend it to other blockchains in the future.

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