Liquidity Composition

Putting the pieces together.

Every protocol has different liquidity needs but by composing concentrated AMM and Money Market positions together, we can actually replicate a 2nd-order approximation of whatever liquidity payoff profile they need.

Every protocol has a "payoff profile" which specifies when their users earn and lose money. For payoff profiles based on token prices, just a combination of AMM and money market positions are enough to replicate it. For payoff profiles that depend on time, we use a rate swap protocol (like Pendle) to isolate and remove the time dependency. For other dependencies like competitions and oracles, we tokenize it and give it an artificial price thus reducing us back into the basic setup.

Ultimately, the point is that any payoff profile can be decomposed and rebuilt from a set of basic primitives.