Market Makers

Documentation Index

Fetch the complete documentation index at: https://whitepaper.flowstate.exchange/llms.txt

Use this file to discover all available pages before exploring further.

For market makers, FlowState is a structured inventory deployment venue and a bot-integratable execution layer. C1 Pools remove the inventory mark-to-market problem on thin-liquidity tokens, unlock capital-efficient one-sided strategies and integrate directly into existing MM bot infrastructure through a standard EVM contract interface and event-driven fill flow. Returns come from inventory unwind value, acquisition spread on below-oracle fills and basis capture when paired with a hedge venue.

​

The MM problem with thin liquidity

Professional market makers do not quote long-tail tokens. The economics fail at five points:

• Inventory risk. Tokens with sub-$5M liquidity can move 50%+ on retail flow. Inventory marks become catastrophic.
• No hedge venue. Without CEX listings or perp markets, MMs cannot offset directional exposure. Position becomes pure beta.
• Adverse selection. Insiders trade on information against MMs that have no edge on the underlying project.
• Capital opportunity cost. The same capital earns 10-20% APR on ETH-USDC market making with proper hedging.
• Spread economics. Volume is too low to generate enough spread revenue to cover operational cost.

The industry consensus is that thin-liquidity MM requires $1-10M of working capital per venue with no ability to hedge, which is economically irrational. So MMs do not quote, the tokens stay illiquid and the trapped holder problem persists.

​

How C1 changes the MM math

C1 Pools invert several of these constraints:

​

Bot integration patterns

C1 Pools are designed to integrate into existing MM bot infrastructure. The contract interface is standard EVM. Events are emitted for every state change. Bots can subscribe via RPC websocket or run their own indexer against the FlowState subgraph when live. There are four patterns, each suited to a different MM strategy.

​

Pattern 1: Inventory unwind

The simplest pattern. The MM has accumulated inventory on a token (from other venues, OTC or strategic acquisition) and wants to exit without taking AMM slippage. The bot monitors inventory levels and deposits excess into the relevant C1 Pool when targets are exceeded. The bot listens for buyer settlement events on its deposits. Each fill is a sell at oracle minus 1%. Inventory drains organically as buyers route through aggregators.

​

Pattern 2: One-sided liquidity provision

The structurally interesting pattern. The MM runs a permanent inventory position in C1 and hedges short on a CEX perp or futures market. C1 becomes the sell venue, the hedge venue handles the long exposure offset. The MM earns the basis between the oracle settlement price and the hedge venue mark over the holding period, net of the 1% protocol fee. Acquisition spread is additional: any difference between the bot’s inventory cost and oracle is captured at fill. On fill events the bot reduces the perp short by the filled amount and replenishes inventory if depth falls below target.

​

Pattern 3: Aggregator-routed acquisition

When the MM is on the buy side (acquiring inventory for strategy, market making against another venue or executing a client order), the bot routes through a DEX aggregator. The aggregator’s smart order router selects C1 automatically when execution is best. The MM acquires at oracle price with zero slippage instead of crossing the AMM curve. This is the same flow any other aggregator user runs. For an MM, the value is that thin-liquidity acquisitions become economic in cases where they would not be against a pure AMM.

​

Pattern 4: Cross-venue arbitrage

For MMs already running multi-venue strategies, the bot monitors C1 oracle price against CEX spot, perp marks, RFQ quotes and AMM mid-prices. When pricing divergence on another venue exceeds cost thresholds, the bot acquires on the cheap venue and deposits into C1 to capture the spread on fill. The arbitrage closes because C1 always fills at oracle, while CEX and AMM venues do not. The MM captures the spread minus the 1% C1 fee minus gas.

​

Technical interface

C1 Pools expose a standard EVM contract interface with deposit, withdraw and quote functions plus events for every state change. Bots subscribe to fill events via RPC websocket or query the subgraph when live. Aggregator-level integrations (KyberSwap, OKX DEX, Odos) handle the buy-side routing without MM action required. See Integration Overview for the full on-chain interface, event categories and SDK status.

​

Commercial alignment

MM economics in C1 come from three sources:

• Inventory unwind value. MMs holding token inventory from other venues (OTC fills, strategic acquisitions, secondary buys) can exit at oracle minus 1% instead of taking AMM slippage. For a thin-liquidity token where AMM exit costs 15-30%, the difference between AMM execution and oracle minus 1% goes straight to MM P&L.
• Acquisition spread. When the MM acquires inventory below oracle (OTC discount, anticipated dump capture, off-market block), the spread between acquisition cost and oracle settlement minus 1% is captured at fill.
• Basis capture. For tokens with perp or futures hedge venues, MMs can deploy delta-neutral strategies. Profitability requires the basis between oracle and hedge venue to exceed the 1% protocol fee over the holding period.

The 1% protocol fee is paid by the depositor. Sell-side depositors do not earn a share of the fee. The fee is distributed to aggregators, STATE stakers, the reseller/introducer when one is present in the route and the protocol buyback. For MMs willing to introduce their own flow (sourcing buyer demand, structuring custom pools with partner projects, routing trades through their integration), an introducer arrangement is available. The introducer captures the 30% reseller share (0.30% of settled volume) on top of any depositor-side returns. This is a separate commercial relationship from standard pool participation.

​

Get started

For market maker partnerships, technical integration support and sandbox access for bot development, contact partnerships@flowstate.exchange.