Node Owned Liquidity

Introduction

Node Owned Liquidity is a pivotal concept in the Lumia ecosystem, particularly for the Lumia L2 DAC (Data Availability Committee) nodes. Unlike regular validator nodes which receive their rewards gradually over time, DAC nodes are granted these rewards from the beginning. This strategic allocation allows for immediate liquidity, which is essential for facilitating large trades on Lumia Stream.

How It Works

DAC nodes, which validate Lumia L2, receive their rewards in LUMIA tokens upfront. These rewards are subject to a vesting schedule, but the liquidity is available immediately for use on Lumia Stream. This system is designed to handle significant trade volumes efficiently. Here's a detailed explanation of the process:

1. Trade Initiation:

   • A trader on Lumia Stream intends to perform a trade to acquire XYZ tokens.

   • The available liquidity within the Liquidity Nodes on Lumia Stream is insufficient to facilitate the trade.

2. Utilizing Node Owned Liquidity:

   • In this scenario, the Liquidity Node will utilize the LUMIA tokens owned by DAC nodes.

   • These tokens are posted as collateral in a strongly overcollateralized position within the XYZ/LUMIA lending pool.

   • The Liquidity Node borrows XYZ tokens using the posted LUMIA tokens as collateral.

3. Execution and Settlement:

   • The borrowed XYZ tokens are sent to the Lumia Stream trader to complete the trade.

   • Subsequently, the Liquidity Node hedges the order, rebalances its portfolio, and repays the loan.

   • This entire process is carried out while maintaining a delta-neutral position for Liquidity Nodes and DAC Nodes.

Benefits

1. Instant Liquidity:

   • DAC node delegators provide LUMIA tokens that are otherwise idle, enabling immediate liquidity for large trades.

   • This ensures that even trades worth millions of dollars can be settled instantly on Lumia Stream, with 1:1 CEX pricing.

2. Real Yield for DAC Nodes:

   • By leveraging Node Owned Liquidity, DAC nodes generate real yield.

   • This adds a significant value proposition for delegators who stake their LUMIA tokens with DAC nodes.

3. Increased Capital Efficiency:

   • Using node rewards liquidity to facilitate trades takes validator node capital efficiency to unprecedented heights.

   • The entire amount of delegated LUMIA, which is in the tens of millions, counts towards the TVL of Lumia Stream.

Conclusion

Node Owned Liquidity is a sophisticated mechanism that enhances the liquidity, efficiency, and security of the Lumia ecosystem. By leveraging the immediate availability of LUMIA tokens from DAC nodes, Lumia Stream can facilitate large trades seamlessly, providing real yield to DAC Nodes and boosting the platform's TVL. This innovative approach underscores the strategic advantage of DAC nodes within the Lumia network and their critical role in driving the ecosystem's growth and stability.