Withdraw Liquidity

Withdraw Liquidity

Withdraw liquidity refers to getting liquidity back from the pool. Makers can receive the deposited liquidity they initially provided by returning the CLB tokens they hold(the returned CLB tokens are burned). The amount of liquidity you can withdraw is determined by the current CLB token value at that moment.

For example, let's say Alice has previously provided liquidity to the USDC-ETH/USD +0.03% liquidity bin and currently holds 20 CLB tokens.

• If the CLB token Value for this bin is 1.10, the total value of Alice's tokens would be 22 USDC. When Alice chooses to withdraw her liquidity by burning the CLB tokens, she would receive the equivalent value of 22 USDC.

• If the CLB token value was 1.00 when Alice initially provided liquidity, she would have earned a profit of 2 USDC, which represents a 10% return on her liquidity provision.

Utilization & Removable Liquidity

While the Chromatic Protocol offers the ability to withdraw liquidity, it's important to note that the process is not always instantaneous. It is necessary to consider the current state of utilization of the bin.

Within the liquidity bin, a portion of the liquidity provided is allocated as maker margin, potentially earmarked for taker's profit based on trading outcomes. This allocation means that you can only withdraw the portion of liquidity that remains unutilized and is freely available for withdrawal.

For example, let's say Alice holds 20 CLB tokens and she is seeking to reclaim her liquidity.

• However, she discovers that 10 CLB tokens are currently utilized within the bin. Alice can only withdraw the remaining 10 CLB tokens immediately that are not being utilized.

• To ensure a fair and systematic withdrawal process, the Chromatic Protocol adheres to the next oracle round rules, as outlined in the Settlement section.

• For instance, if the next oracle round 1 introduces an additional 2.5 CLB tokens of free liquidity within the bin, Alice can withdraw an amount equivalent to the value of 12.50 CLB tokens, which includes the 10 CLB tokens she previously withdrew plus the additional 2.5 CLB tokens.

While immediate and complete withdrawal may not always be possible, Chromatic Protocol ensures a fair and transparent approach to reclaiming liquidity based on the availability of removable assets within the bin.

When requesting to burn CLB tokens in excess of the currently available withdrawable amount, the mechanism is designed to automatically withdraw additional removable liquidity at each oracle round until the requested amount is fulfilled. During each oracle round, additional removable liquidity is automatically withdrawn until the requested amount is completed. The price at which liquidity is reclaimed (CLB burned) during this process is determined by the CLB token price at each oracle Round.

The time required to complete the withdrawal process depends on the utilization status of the liquidity bin and can vary accordingly. However, even during the withdrawal process, it is possible to stop the withdrawal process and claim only the liquidity that has been withdrawn up to that point.

In scenarios where multiple participants request liquidity withdrawals, the withdrawals are processed according to oracle round order.

• For instance, Alice requested a withdrawal in oracle round 1 and John requested a withdrawal in Round 2, but there is insufficient remaining liquidity balance in the pool to accommodate both requests. When liquidity becomes available for withdrawal in Round 3, Alice, who made the withdrawal request first, will have her liquidity withdrawn first.

When multiple participants seek to withdraw liquidity simultaneously in the same oracle round, the transactions are processed based on a proportionate allocation.

• For instance, both Alice and John request withdrawal in Round 1, with Alice seeking to withdraw 200 USDC and John aiming to withdraw 300 USDC.

• The available liquidity for withdrawal in Round 2 is only 100 USDC, they would receive proportions of the available liquidity in a 2:3 ratio. Alice would be able to withdraw 40 USDC, while John would be able to withdraw 60 USDC.

• Subsequently, in subsequent rounds where additional liquidity becomes available for withdrawal, they would continue to divide the remaining liquidity proportionally.