What Is On-Demand Liquidity? Inside Bolt’s Breakthrough

Decentralized finance, or DeFi, has transformed the crypto trading landscape, but many protocols suffer from a persistent problem: high price slippage.

Poor liquidity means orders aren’t fulfilled at the desired rates—effectively amounting to a tax on frustrated traders. Crippling slippage is exacerbated by clunky bridges, high fees and slow confirmation times, resulting in frustrating experiences for end users.

That pushes DeFi enthusiasts back to centralized exchanges, which custody users’ assets—meaning they no longer truly own them. As seen during the collapse of FTX in 2022, this can have devastating consequences for consumers.

The newly launched Bolt Liquidity aims to fix this by delivering CEX-level price efficiency in decentralized ecosystems—all while tackling fragmentation in the current multi-chain landscape.

Here’s how it works.

What is Bolt?

Bolt Liquidity positions itself “the first on-demand liquidity network that powers the best cross-chain price execution.”

Bridging, liquidity aggregation, price optimization, and swaps are all consolidated into a single API, in what the project calls “the ultimate plug-and-play solution.”

The network’s goal is to execute trades seamlessly across the chains it supports so traders can tap into the best available prices—even in low-liquidity situations.

A simple, unified interface eliminates the need to manually bridge assets, fund gas on new chains, or navigate between different versions of cryptocurrencies.

Meanwhile, liquidity providers can prevent their capital from sitting idly by deploying funds efficiently and across multiple networks in one place.

Not only does this open up new opportunities across the DeFi ecosystem, but Bolt says it also reduces exposure to impermanent loss, a common risk when the ratio of tokens in liquidity pools shifts due to significant price changes.

Bolt’s single-sided liquidity pools address this by allowing a single asset to trade against multiple quotes (ETH, USDT, SOL, etc.) without fragmenting liquidity. This eliminates the need for LPs to hold multiple assets, minimizing exposure to price fluctuations while still capturing trading fees.”

The platform says there are advantages for developers and aggregators, too. Projects that integrate Bolt’s infrastructure can offer their users more competitive pricing, and potentially reduce security risks by opting into standardized cross-chain settlement.

Who’s behind Bolt Liquidity?

Bolt Liquidity’s founder is Frojdi Dymylja, who began blockchain and algorithmic trading in 2017.

At Tendermint, Dymylja was a key contributor to the Cosmos SDK, while he also contributed to or advised protocols including Babylon, Celestia, and Dymension.

His eight years of experience in the space has, he says, helped him understand where the pain points lie—both in terms of liquidity inefficiencies and blockchain infrastructure.

The end result is a product he wished had existed back when he was a trader—and one he has been uniquely positioned to build.

What problems does on-demand liquidity solve?

Bolt Liquidity argues that fragmented liquidity is crippling DeFi’s potential, with the blockchain landscape now “a messy patchwork of shallow pools and inefficient trading venues struggling to keep pace with real markets.” In an era where hundreds of thousands of tokens are being created each week, this is a problem that’s only getting worse.

The platform says its on-demand liquidity engine offers the following advantages:

• Zero slippage: Bolt Liquidity says it decouples automated market makers from asset reserves. This is achieved through the Proof of Pricing Efficiency mechanism, otherwise known as PoPE for short. According to the project, trades are executed at true market rates by mirroring real-world data on-chain.
• Empowering LPs and market makers: In a departure from the status quo, liquidity providers only need to deploy capital when it’s needed. Bolt claims this eliminates “the constant headache of rebalancing and being exposed to LVR, MEV, and arbitrage risk.”

Further down the roadmap, Bolt plans to route trades across on and off-chain liquidity alike to further open access to the best possible prices. The project also aims to open up active market-making to regular users through a feature called Dynamic Debt Provisioning, which means capital no longer needs to be pre-committed. Its framework will also be extended to cater to a broader range of assets.

Put another way, Bolt’s longer-term ambition is to move further and further toward more on-demand liquidity, helping to build a world “where liquidity flows like water,” with its network combining “the precision of centralized markets with the trustlessness and composability of DeFi.”