Everything You Need to Know About “Native”: The Programmable Liquidity Layer

Native is a programmable liquidity layer, currently offering three products: Native, a protocol-based liquidity interface; NativeX, a cross-chain transaction aggregator; and Aqua, a new type of lending tool for market makers. 

Native assists projects in connecting liquidity directly on their websites, providing a more convenient interaction experience for protocol users. By using Native's tools, protocols can easily access Native's liquidity on their websites and modify transaction fees as needed.

Cross-Chain Transaction Aggregation Potential

Although cross-chain transaction aggregation products are currently underutilized, they have growth potential. Users have significant demand for both cross-chain bridges and transaction aggregation but often perform these operations separately. While cross-chain transaction aggregation offers a convenient trading experience, it has not been widely adopted due to liquidity and user habit issues. 

However, NativeX is at the forefront of cross-chain aggregation, integrating a significant amount of liquidity and accumulating resources from market makers. It captures over 70% of DeFi orders, which contributes to the launch of Aqua. Additionally, with the emergence of major L1 and L2 solutions, the demand for cross-chain transactions is increasing, which may lead to more widespread adoption of cross-chain transaction aggregation.

What is Native?

Native is positioned as a programmable liquidity layer, currently offering protocol-facing liquidity interface Native and cross-chain transaction aggregation product NativeX, to provide traders with a more convenient trading experience. Native has launched Aqua, a new lending protocol targeting both users and market makers, on the testnet. Aqua enables market makers to borrow by collateralizing assets and settle user transactions using funds from the Aqua pool, thereby increasing capital efficiency while minimizing market maker default risks as much as possible.

In April 2023, Nomad led a $2 million seed round investment. Nomad Capital received investment from Binance in March 2023 and invested in its first project, Native, the following month. In December 2023, Native received a strategic investment from Nomad Capital.

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Native Products

Aqua

Decentralized exchanges initially utilized order book and RFQ trading types, but Ethereum's high costs and shallow liquidity favoured automated market maker (AMM) mechanisms like Uniswap's constant product model. Native's Aqua introduces a novel lending product, blending decentralized exchange and lending attributes. It aims to boost capital efficiency for market makers and deposit returns for users while ensuring fund security. Aqua allows market makers to borrow assets collateralized to engage in market-making across different blockchains, enhancing liquidity and efficiency. Borrowed funds remain within Aqua, minimizing risks compared to traditional lending. Users benefit from higher returns and stable yields, while market makers have a continuous demand for transaction settlements.

Native & NativeX

As Ethereum's gas issues persist, the crypto market shifts towards multi-chain adoption. Native addresses fragmented liquidity by integrating liquidity from multiple chains. NativeX aggregates liquidity from various DEXs and cross-chain bridges, collaborating with private market makers (PMMs) to offer better quotes to traders. PMMs utilize an RFQ mechanism, enhancing flexibility and capital efficiency. With NativeX, traders enjoy reduced costs and retain asset ownership. Projects can connect to Native's liquidity sources and charge trading fees, while market makers access more order flow. In summary, NativeX and Aqua offer innovative solutions to liquidity challenges, enhancing market efficiency and user experience.

RIsk Associated with Native Ecosystem

There are two main risks associated with the Native ecosystem. Firstly, there is a code risk despite the audits conducted by Salus, Veridise, and Halborn, as well as the upcoming launch of the immunefi bounty program. Even with these measures in place, potential vulnerabilities may still exist within the codebase, posing risks to the security and functionality of the platform. Secondly, there is a risk related to delayed liquidation within the Aqua protocol. While Aqua's liquidation process is overseen by whitelisted liquidators, there remains a possibility of market makers facing significant token exposure during extreme market conditions, potentially leading to delayed liquidation. Such delays could result in losses for liquidity providers who rely on timely liquidation to mitigate risks effectively.