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Spot Trading (CL AMM)

Spot trading is where tokenized assets become liquid, composable, and continuously tradable. The protocol uses a Concentrated Liquidity Automated Market Maker (CL AMM) to enable 24/7 price discovery, capital-efficient liquidity provision, and depth-aware pricing that feeds into all downstream products—lending, futures, and mark-to-truth auctions.

The design goal is straightforward: create deep, efficient markets for rare assets where prices reflect executable liquidity, not just last prints or external oracles. The CL AMM serves as the pricing oracle for the entire protocol, providing TWAP/RWAP references that inform borrowing limits, liquidation parameters, and supply management mechanisms.

Price convergence to fundamentals: While the CL AMM enables continuous price discovery through market forces, mark-to-truth auctions ensure that prices remain anchored to objective asset value. When market price deviates significantly from acquisition costs and recent market activity, mark-to-truth auctions create arbitrage opportunities that allow the market to converge price back to fundamentals. This backstop mechanism ensures that speculation cannot push prices too far from real-world value—arbitrageurs profit by trading the spread, naturally correcting mispricings. The combination of continuous market pricing (CL AMM) and periodic recentering (mark-to-truth) creates markets that are both liquid and fundamentally sound.

Why CL AMMs for RWAs​

Traditional constant-product AMMs (like Uniswap V2) spread liquidity uniformly across all price ranges, creating capital inefficiency for assets with established price ranges. For tokenized RWAs where prices should track objective NAV, most liquidity sits idle far from the current price.

Concentrated Liquidity AMMs (like Uniswap V4) allow liquidity providers to concentrate capital within specific price ranges, dramatically improving capital efficiency and reducing slippage for trades within those ranges. This is critical for RWAs where:

  • Prices should stay near NAV: Mark-to-Truth auctions ensure price convergence, making wide price ranges unnecessary
  • Capital efficiency matters: Professional market makers can provide deep liquidity with less capital
  • Slippage impacts composability: Tight spreads enable better lending LTVs and futures leverage

The CL AMM as protocol oracle​

The spot trading pool isn't just a venue for swaps—it's the pricing oracle for the entire protocol. Every product references spot trading data:

  • Lending markets: LTVs calculated from TWAP/RWAP windows to resist manipulation
  • Futures contracts: Funding rates and liquidation triggers reference spot pricing
  • Minting mechanisms: Release curves and floor prices track guarded pool price
  • Mark-to-Truth auctions: Triggered when spot price deviates from objective NAV

This oracle-free design eliminates external dependencies and ensures all pricing is grounded in executable liquidity—what you can actually trade at, not what someone claims the price should be.

How it works​

The CL AMM operates through several interconnected mechanisms:

Price discovery​

The pool maintains a current price (mid-price of the last trade) that reflects real-time supply and demand. Unlike traditional order books, the AMM provides continuous liquidity at all price levels within active ranges, enabling instant execution without waiting for counterparties.

In a CL AMM, liquidity exists as ranges, not discrete orders. When you trade through a range, you're executing against all liquidity providers in that range proportionally.

Liquidity structure​

Liquidity providers deposit tokens within specific price ranges:

  • Above current price: Sell liquidity (tokens available for buyers)
  • Below current price: Buy liquidity (stablecoins available for sellers)
  • At current price: Two-sided liquidity (both tokens and stablecoins)

As the price moves through ranges, liquidity providers' positions automatically rebalance—selling tokens as price rises, buying tokens as price falls.

Professional market making​

The protocol expects professional market makers to provide deep, tight liquidity around the current price. These market makers have:

  • High-frequency information about real-world asset markets
  • Capital efficiency through concentrated positions
  • Active management to maintain spreads and depth

Trust minimization: While market makers provide liquidity, they cannot manipulate prices without economic consequences. Mark-to-Truth auctions create arbitrage opportunities when prices deviate from fundamentals, and TWAP/RWAP smoothing resists short-term manipulation.

Swap fees and routing​

Every trade in the CL AMM incurs a swap fee (typically 0.30–0.80% for RWA pools, reflecting the lower liquidity and higher facilitation costs compared to mainstream crypto assets). These fees are dynamically routed to align incentives across the protocol:

Fee distribution (governance-adjustable per collection):

  • Default split: 70% to LPs, 15% to collection cost pot, 15% to protocol treasury
  • Ranges: LPs 65–80%, cost pot 10–20%, protocol 10–15% (always sum to 100%)
  • LP share distributed by merit (tight, active LPs earn more per dollar than wide, passive LPs—see Yield Mechanisms)
  • Collection cost pot helps pay custody, insurance, and operational expenses, reducing need for dilution
  • Protocol treasury covers AMM infrastructure, mark-to-truth facilitation, security monitoring, development

Dynamic fee schedules (Phase 1 roadmap): Fee tiers adjust based on realized volatility, liquidity depth, and market conditions. High-volatility periods or thin liquidity justify higher fees to compensate LPs for inventory risk. Stable, deep markets can operate at lower fees to maximize volume. Fee tier changes are governance-gated once governance exists to prevent manipulation.

Fee Details

For comprehensive information about swap fee routing, collection cost coverage, and how trading activity reduces dilution pressure, see Fees & Yield Routing.

Depth-aware pricing​

The protocol tracks not just spot price but also comprehensive liquidity and market health metrics. This creates manipulation-resistant pricing and enables informed decision-making across all products.

Core price metrics (all available on-chain):

  • TWAP (Time-Weighted Average Price): Smooths price over time windows for manipulation resistance
  • VWAP (Volume-Weighted Average Price): Captures actual execution reality from traded volume
  • RWAP (Realized Weighted Average Price): Impact-aware pricing that reflects true slippage cost
  • Depth-Aware Mark: Symmetric liquidity probe for oracle-grade pricing

Liquidity health metrics (computed on-chain):

  • DepthScore: Relative available liquidity near mid-price
  • Imbalance: Liquidity skew indicating inventory pressure
  • Impact Slope: How quickly price moves per unit traded
  • Spread: Observable execution friction
  • Volatility: Realized price volatility for dynamic fee tuning
  • Toxic Flow: Correlation between flow and price drift
  • Liquidity Decay: Rate of market maker withdrawal

These metrics ensure that downstream products (lending, futures, minting) reference sustainable prices backed by real liquidity, not momentary spikes. All metrics are composable—external protocols can query them for their own risk management and pricing needs.

What you'll find here​

The following sections explore spot trading in depth:

Core mechanics:

  • CL AMM Primer: How concentrated liquidity works, liquidity ranges, and capital efficiency
  • Pricing: Spot price, TWAP, RWAP, and how depth-aware pricing resists manipulation
  • Liquidity management: Professional market makers, active management, and protocol incentives

Advanced features:

  • Limit orders: How limit orders work in CL AMMs as single-tick liquidity positions
  • Open interest orderbook: Price-gated limit order layer with SumTree architecture for efficient on-chain execution

Each section includes formal structure, worked examples, and analysis of how the CL AMM serves as the pricing foundation for the entire protocol.

Why this matters​

Spot trading is the heartbeat of the protocol. Get it wrong and you have unreliable pricing, poor composability, and manipulation risk. Get it right and you have:

  • Reliable price discovery that reflects real executable liquidity
  • Capital-efficient liquidity that enables tight spreads with less capital
  • Manipulation resistance through depth-aware pricing and mark-to-truth backstops
  • Protocol-wide oracle that feeds into lending, futures, and minting

The CL AMM design ensures that tokenized RWAs have the liquidity infrastructure needed to compete with traditional financial markets while maintaining the transparency and composability of DeFi.