Liquidity

Liquidity in Wattlet is managed through an automated market maker (AMM) model that enables real-time trading between USDT and regional KWT tokens. Each KWT variant has its own independent liquidity pool, ensuring that price formation reflects both local electricity data and market demand. This structure allows the ecosystem to maintain transparent price discovery without requiring centralized order books or intermediaries.

Pool Structure Each liquidity pool (e.g., USDT/KWTCN, USDT/KWTUK) is initialized with parameters derived from oracle-provided reference prices. Liquidity providers (LPs) deposit assets into these pools to enable trading and earn a share of transaction fees. The AMM automatically adjusts token ratios in response to buy and sell activity, keeping the market continuously liquid.

Price Formation The trading price of KWT in each pool is determined by the AMM’s mathematical curve, while its reference price is provided by the oracle network. If the market price deviates significantly from the reference price, arbitrage between on-chain and off-chain data naturally restores alignment. This dual-layer model — AMM for real-time trading, oracle for external validation — ensures that KWT pricing remains efficient, transparent, and tied to verified energy costs.

Liquidity Depth and Stability Liquidity depth varies by regional pool and directly impacts slippage, execution speed, and price sensitivity. Higher pool depth reduces price volatility, allowing large-volume trades to occur without disrupting market equilibrium. The protocol periodically monitors pool utilization and may adjust liquidity incentives to maintain balanced depth across regions.

Participation Users can provide liquidity by depositing equal-value pairs of USDT and KWT into a selected pool. In return, they receive LP tokens representing their share of the pool. LPs earn rewards from transaction fees and may also receive additional WATT incentives based on pool performance and participation duration.

Wattlet’s liquidity framework is designed for scalability and transparency. It supports dynamic market formation across multiple energy regions while ensuring that every transaction remains verifiable and market-driven.