Cross-chain volume is a key growth indicator for a liquidity network. However, large volumes in one direction will quickly drain liquidity in the other direction.
To solve this problem, Connext dynamically assesses the liquidity of the AMM curve and mimics AMM with stable swaps like Curve. Asset prices move as a function of the ratio of available liquidity in each chain. The more imbalanced the liquidity, the bigger the price difference. If you want to get more information about cross-chain liquidity visit https://rampdefi.com/.
In other words, consumers pay a higher price to acquire assets in a more liquid chain and a lower price to acquire assets in a less liquid chain.
This is an attractive arbitrage incentive for market makers who are already using similar opportunities in AMM such as Uniswap. Cross-chain arbitration is also possible with virtual AMM Connect.
Connect becomes very secure as more routers come online and liquidity increases online. Today more than 100 Ethereum assets are transferred to 17 different chains. There is plenty of room for new routers to focus on liquidity constraints as Connext expands its ecosystem. Routers can find profitable opportunities by identifying routes that are popular but still illiquid and flooding them with liquidity.
Liquidity enhances Connext's ability to expand its network and integrate more chains and projects. Integration is very tempting and difficult because it allows the protocol to instantly integrate with the wider ecosystem of users in just one transaction.
This is where the scalability of the liquidity network comes into play, Connext can quickly meet the demand for new chains and assets.