DeFi Liquidity Crisis: The Hidden Costs of Liquidity (w/ Lucidly Finance)

How do DeFi protocols decide how much yield to pay liquidity
providers? Or better yet, how do they even know their cost of
capital?


In this episode of the TEACHMEDEFI podcast, Sohejl chats with
eth_sign from Lucidly Finance to break down one of DeFi’s
secrets: the mechanics of liquidity renting. Together, we explore
how protocols currently navigate inefficient markets, the role of
market makers, and what it takes to attract liquidity providers
sustainably.


We chat about how incentive structures often miss the mark, and
why understanding capital costs is critical for a protocol’s
survival. Eth_sign also shares Lucidly Finance’s vision of
creating a transparent, more efficient liquidity market—one where
incentive negotiation is key to balancing provider returns with
protocol costs.


If you’ve ever wondered how DeFi liquidity works behind the
scenes or what’s next in evolving on-chain financial
infrastructure, this episode is for you.


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Guest Links / Additional Material:


Lucidly Website: https://lucidly.finance/


Lucidly App: https://app.lucidly.finance/


Lucidly on X: https://x.com/LucidlyFinance


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Timestamps:


00:00 - Intro


00:44 - BetterOnStellar Campaign


01:36 - Onchain Liquidity Renting


13:00 - Liquidity Provision & Protocols


18:00 - Simple Explanation


19:18 - Finding The Cost of Capital


20:40 - User Interface Showcase


25:20 - Go-To-Market Strategy


27:20 - What’s Next?


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Disclaimer:


TEACHMEDEFI is a provider of entertainment and opinions. We are
neither a broker/dealer nor an investment advisor. This is not a
service for issuing or receiving financial or investment advice.
None of our content constitutes a recommendation – or should be
understood as such – to conduct transactions in securities,
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investment strategies presented in our discussions or provided
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on whether a stock, cryptocurrency, crypto-asset, or investment
approach is suitable for the financial needs of a particular
individual.