Liquidity Layer

The Liquidity Layer solves the issue of fragmented liquidity by unifying liquidity across all Fluid-based protocols that ensure:

• Seamless migration without disrupting liquidity

• Allows new protocols to be easily plugged into the existing liquidity

• Enables consistent lending and borrowing rates, preventing capital inefficiencies

Automated Ceilings prevent large-scale liquidations or mass withdrawals by dynamically adjusting caps per block and mitigate the risks of liquidity drains during market volatility.

When a market crashes, traders rush to sell volatile assets (increasing sell pressure), which triggers the DEX Liquidity mechanism, where liquidity pools absorb the sell pressure. Now, the protocol holds more of the volatile asset (helping stabilize collateral reserve) and is ready for potential liquidations, reducing the impact of liquidations.

During bullish market action, stable asset liquidity increases, preventing liquidity crunches for borrowers holding volatile asset debt.