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Liquidity Ownership

Liquidity Ownership (LO) measures the ratio between the amount of token liquidity that a project owns compared to the amount of liquidity a project should own. This metric is designed to look at a project’s “liquidity debt”: the difference between a project’s owned, extractable liquidity and a baseline level of sustainable liquidity.
Simply put, LO looks to answer the following question: Does this project own ample liquidity to back the token based on its MCAP?

Liquidity Ownership Formula

LO=(ovel/Xsusline)poLO = (\frac{ovel/X}{susline})^{po}
for
ovel/X<SL(X)ovel/X< SL(X)
LO=1LO=1
for
ovel/X>=SL(X)ovel/X >= SL(X)
where:
susline=SL(X)susline = SL(X)
for
SL(X)<1SL(X) < 1
susline=1susline = 1
for
SL(X)>=1SL(X) >= 1
where:
SL(X)=(0.7/t1)1/α(eX/seX/seX/s+eX/s)β/αSL(X)= (0.7/t1)^{1/α}*(\frac{e^{X/s} - e^{-X/s}}{e^{X/s} + e^{-X/s}})^{-β/α}
Constants configs.:
po=0.5po = 0.5
For M. Caps. <= $250M:
t1=14.4t1=14.4
s=1,062,000,000s=1,062,000,000
β=0.31β=0.31
α=0.69α=0.69
For M. Caps. > $250M:
t1=18.4t1=18.4
s=3,000,000,000s=3,000,000,000
β=0.37β=0.37
α=0.63α=0.63
Variables description:
XX
: Market cap. in usd
YY
: Extractable liquidity to market cap. ratio
ovelovel
: Owned valid extractable liquidity in usd
suslinesusline
: The
ovel/Xovel / X
ratio considered the minimum health standard for any given market cap.

Scoring

We directly compare owned extractable liquidity vs the sustainability range lower bound.
The difference between this and LS is what sustainability range bound we compare to (upper for LS vs lower for LO) & whether or not rented liquidity is factored in (rented + owned for LS vs owned for LO).
The more owned liquidity you have, the better score you receive. If you have no Protocol Owned Liquidity you would receive a 0 score. If owned liquidity is equal to or greater than the sustainability range lower bound, then you score a perfect 100. That would signify the project owns the minimum amount of liquidity that we have determined is sustainable. Anything in between scores from 0 to 100.
One thing to note - projects get rewarded with more points towards their score early on. Think of it as a simple sqrt(x) graph, where your score goes up faster at the beginning and slower towards the end. For example, right now if a project owns 25% of the liquidity we deem they should, we are giving them a score of 50/100. This is purposeful to drive the importance of POL.
Last modified 7mo ago