As of October, the total trading volume on on-chain Perpetual DEXs has surpassed $1 trillion, setting a new historical record. In the context of the explosive growth in the decentralized derivatives (Perp) market, liquidity depth and stability have become key factors determining the long-term competitiveness of protocols. Despite the continuous record-breaking trading volumes in decentralized perpetual contracts, issues such as fragmented liquidity, unsustainable incentives, and liquidity flight amidst severe market volatility remain fundamental challenges for the vast majority of DEXs.

In the recent heated competition among DEXs, Nature V5, branded as an innovative DEX, has announced the imminent launch of its core component—the LP staking pool. As a pioneer in the Nature V5 product ecosystem, the launch of the LP staking pool signifies a key practice in addressing the aforementioned industry pain points within its DeFi 5.0 paradigm. This article will explore the potential value of its ecosystem from two dimensions: the current market situation and the solutions offered by Nature V5.

NO.1 The Prosperity and Concerns of the DEX Perp Market

In the past year, DEX perpetual contract trading has experienced unprecedented growth. The main driving factors include:

• Urgent Demand for Asset Self-Custody:The trust crisis surrounding centralized exchanges has prompted a significant number of professional traders to shift to on-chain platforms.
• Continued Optimization of Trading Experience:Lower latency, reduced trading slippage, and a wider variety of trading pairs are continuously narrowing the experiential gap with CEXs.
• Maturation of Multi-Chain Ecosystems:This has provided a fertile ground for derivative protocols to deploy and attract users across multiple public chains.

However, beneath the prosperity, there are still hidden risks:

1. Liquidity Dependent on High Emissions:Many protocols rely on continuous native token emissions to incentivize liquidity, leading to a phenomenon known as “liquidity mercenaries.” Once token incentives diminish, liquidity can quickly evaporate, negatively impacting the trading experience.
2. Negative Cycle of “Mining, Withdrawing, and Selling”:Traditional LP incentive models often disconnect from the long-term value accumulation of the protocol. Liquidity providers tend to sell reward tokens immediately, creating persistent downward pressure on token prices.
3. Insufficient Risk Resilience:In extreme market conditions, decentralized and short-term oriented liquidity is more easily drained, exacerbating market volatility and potentially threatening the security of the protocol.

No.2 Nature V5’s Response: From “Mercenary Liquidity” to “Co-Building Ecological Capital”

The DeFi 5.0 paradigm proposed by Nature V5 centers around the design of mechanisms that create a financial system with self-repair and balancing capabilities. The upcoming LP staking pool is a concrete manifestation of this concept at the liquidity level.

Unlike traditional single-yield staking, the LP staking pool of Nature V5 is built upon its “Unified Capital Pool” and “Three-Token Model,” aiming to fundamentally optimize the liquidity structure:

• Diversification and Sustainability of Revenue Sources:Stakers’ earnings are not solely derived from trading fees. Through the intelligent rebalancing mechanism of the “Unified Capital Pool,” LP earnings are linked to broader revenue sources such as protocol treasury revenues and ecological incentives. This reduces reliance on the volatility of singular trading volumes and aims to provide more stable yield expectations.
• Value Anchor Linkage with Stablecoin USDN:The LP staking pool will provide deep liquidity for the optimized algorithmic stablecoin USDN within the system. This means liquidity providers are not only supporting trading functions but also participating in constructing the entire ecosystem’s “value anchor.” A robust and counter-cyclical USDN will feed back into the ecosystem, including enhancing the intrinsic value of the V5 platform token, thereby creating a positive feedback loop.
• Commitment to Long-Term Value Accumulation:By linking NAT (governance), USDN (stability), and V5 (incentives), the system attempts to closely bind short-term liquidity incentives with the long-term development of the protocol. For instance, part of the earnings may be used to repurchase and burn V5 tokens or enhance USDN reserves, allowing liquidity providers to directly share in the value dividends arising from the overall growth of the ecosystem, rather than merely benefiting from token emissions.

An Innovative Experiment in Crypto Market Liquidity Mechanisms

The launch of the Nature V5 LP staking pool can be seen as a systematic response to the liquidity challenges currently facing the DEX Perp market. Rather than engaging in competitive practices driven by higher APYs, it seeks to fundamentally reshape the relationship between liquidity providers and the protocol from that of temporary profit partners to long-term co-builders of ecological capital.

The success of this initiative will depend on the ability of its economic model to navigate and balance real market dynamics. However, in an industry that is actively seeking sustainable solutions, Nature V5’s practice undoubtedly provides a valuable case study for observing and researching liquidity construction in the next generation of decentralized derivative protocols.

For liquidity providers and institutions deeply involved in the DeFi ecosystem, don’t forget to pay attention to Nature V5, which will officially launch on November 7th at 3:00 PM (SGT). This is also a key opportunity to capture the next wave of value in the industry’s evolution.