Stacked Liquidity Pool - Concept & Overview

What is a Stacked Liquidity Pool?

A Stacked Liquidity Pool (SLP) is an advanced DeFi construct that combines liquidity provision with token staking mechanisms to maximize yield and protocol alignment. Unlike traditional liquidity pools that use standard tokens, SLPs use staked or liquid-staked tokens as part of their composition, offering enhanced rewards to liquidity providers.

Core Principles

Yield Enhancement Through Staking

Tokens in the pool are not just standard assets but represent staked versions of underlying assets (e.g., wstETH for Ethereum). This means liquidity providers earn staking rewards on top of trading fees.

Native Protocol Token Integration

The pool includes the protocol’s native token (e.g., 0FX) paired with its staked counterpart or other liquid-staked tokens, ensuring tight ecosystem alignment.

Seamless User Experience

Despite the complex underlying mechanisms, users can swap tokens or provide liquidity without needing to interact directly with staking contracts or manage multiple assets manually.

Flexible Composition

SLPs can incorporate tokens staked via third-party aggregators like ReStacks, which auto-aggregate staking rewards across multiple protocols to optimize returns.

Benefits

• Higher APYs for Liquidity Providers: By integrating staking yields, liquidity providers receive compounded returns—both from trading fees and staking rewards.

• Enhanced Incentives for Liquidity Providers: Liquidity providers benefit from staking rewards embedded in the staked tokens they supply, increasing the overall return on their contribution.

• Ecosystem Synergy: SLPs create a strong feedback loop where liquidity and staking reinforce each other, increasing protocol stability and user engagement.

How Inner Implements SLPs

• The 0FX / wstETH pool is the first instance of a Stacked Liquidity Pool in Inner.

• Inner’s routing system simplifies swaps involving staked tokens, abstracting technical complexity.

• Future pools will expand to include stacked versions of other tokens.

• The 0FX / wstETH pool will evolve towards a fully stacked liquidity pool concept with a wst0FX / wstETH pair.

• New fully stacked liquidity pools will be created over time, both for internal applications and external market makers.

Future Outlook

SLPs represent a strategic evolution in DeFi liquidity management, unlocking new layers of yield and protocol integration. Inner’s implementation positions the 0Fx ecosystem to lead in this emerging area, combining composability, security, and enhanced returns.