Hydration optimizes liquidity management for greater DeFi efficiency

Hydration streamlines DeFi by unifying liquidity across chains, eliminating bottlenecks, and leveraging Polkadot’s multichain infrastructure.

By PolkadotOctober 31, 2024

TVL increased from $0 to $45M since launching Omnipool

160+ tradeable assets are supported on Omnipool

Hydration aims to transform the DeFi landscape by solving critical challenges that create inefficiencies in traditional liquidity pools, including fragmented liquidity, price slippage, and cost volatility during network congestion. By leveraging Polkadot’s modular architecture and shared security model, Hydration offers a scalable solution that addresses the complexities of decentralized finance.

Challenge: Managing fragmented liquidity and network congestion

The DeFi industry has faced significant hurdles in managing liquidity across fragmented pools, leading to inefficiencies like multiple trade fees and price slippage. These issues become particularly pronounced during high-volatility events, such as Ethereum’s congestion on Black Thursday, which resulted in cascading liquidations and prohibitively high transaction fees. Hydration sought a network with better control over block production to prioritize critical transactions during high-stress periods while ensuring security and interoperability across multiple chains.

Solution: Leveraging Polkadot for control, security, and interoperability

Polkadot’s shared security model and control over block production provided Hydration the flexibility to manage transaction priorities, even during network congestion. This enabled Hydration to prioritize essential transactions, such as liquidations, without compromising security. With Polkadot, Hydration avoided the need for a separate, costly validator set, further optimizing the platform’s cost-efficiency. Additionally, Polkadot’s XCM (cross-consensus messaging) enabled integration with Ethereum via Moonbeam, bringing liquidity from other blockchain networks into Hydration’s ecosystem.

Results and impact

Since launching Omnipool in January 2023, Hydration’s total value locked (TVL) has grown from $0 to $45M, supporting over 160 tradeable assets. Features like MetaMask compatibility and Moonbeam Routed Liquidity (MRL), which enables cross-chain liquidity flows into Polkadot from ecosystems like Ethereum and beyond, have enhanced both user experience and liquidity management. As an active DEX in Polkadot's DeFi ecosystem, Hydration has increased transaction volumes and secured liquidity and incentives from the Polkadot Treasury to further scale its impact.

Image of Hydration Omnipool's user interface

What’s next

On the horizon, Hydration has several initiatives in the works, including the introduction of its stablecoin, HOLLAR, along with an AAVE v3-powered money market that allows users to borrow and lend assets like Bitcoin. Their entire stack will be vertically integrated, enabling unique future features, such as using Omnipool farming positions as collateral for borrowing and the implementation of ICE (Intent Composing Engine), an intent-based trading model designed to minimize slippage by matching trade intents. Hydration aims to enhance liquidity options and introduce new features to strengthen its role within the Polkadot ecosystem, with a focus on improving user experience.

Headshot of lolmschizz, Hydration

“With Polkadot, we are able to secure Hydration for a fraction of the cost of doing so elsewhere—allocating only ~11% of HDX supply to the initial Parachain slot and decentralized sequencer rewards. As a result, a much larger portion (~27%) could be allocated towards growth initiatives to fully capitalize on the benefits of building an appchain. This includes a vertically integrated DeFi stack featuring the holy trinity of swaps, borrowing, and stablecoin—all built on a bedrock of deep liquidity and efficient block production.”

- lolmcshizz, Hydration

More case studies

Developing Analog's Timechain: Why we chose Polkadot SDK

Discover why Analog chose Polkadot SDK to power its Timechain, leveraging modularity, security, and forkless upgrades to create a seamless interoperability hub for multichain and cross-chain dapp ecosystems.

Polkadot Roundup MMXXIV

Dive into Polkadot Roundup MMXXIV for an in-depth look at 2024 milestones, including high-performance rollups, decentralized governance, and exciting expansions. Discover how Polkadot is evolving into a next-level web3 platform—plus a sneak peek at Polkadot 2, Polkadot 3, and the JAM protocol supercomputer.

Unifying Polkadot’s developer docs: A new chapter for builder experience

The PaperMoon team, supported by a Decentralized Futures grant, launches the Polkadot Developer Documentation Hub, a unified platform that simplifies developer onboarding and provides access to essential resources. This marks a transformative step for builders in the Polkadot ecosystem.

Building the future of decentralized marketing: A case study

Polkadot’s decentralized marketing sets the standard for Web3 growth. With OpenGov, bounties, and community tools, contributors are empowered to innovate, ensuring consistent, impactful campaigns and showcasing the potential of decentralized ecosystems.

Uplifting new voices and validators: Polkadot's path to sustainable decentralization

Decentralized Nodes and Decentralized Voices programs by the Web3 Foundation offer pathways for validators and governance participants to gain influence based on merit, helping to build a fairer, more resilient Polkadot ecosystem that aligns with the core principles of web3.

Is large-scale, high-quality Web3 education possible?

The Polkadot Blockchain Academy (PBA) is taking Web3 education to the next level with PBA-X, an online course crafted to deliver high-quality blockchain knowledge at scale. Learn how we’re preserving educational standards, fostering a global community, and creating new opportunities for learners everywhere.

Blockchain explained: A practical guide from concepts to use cases

Blockchain has grown far beyond its roots in cryptocurrency, reshaping industries from finance to healthcare. This guide walks you through the basics, benefits, and groundbreaking potential of blockchain and its impact on the future of the open internet.

Empowering the next wave of founders: Welcome to EasyA x Polkadot University

Unlock a structured path to start building on Polkadot with EasyA x Polkadot University.

Dynamic & Modular: Scaling Ambition with Agile Coretime

Polkadot’s Agile Coretime simplifies launching and scaling blockchain projects with dynamic blockspace allocation and flexible cost options. Learn how Agile Coretime makes it easier to build, launch, and scale ambitious Web3 projects.

How play-to-earn (P2E) is transforming onchain mobile sports gaming

Play-to-earn games are transforming mobile sports gaming. Learn how blockchain, NFTs, and platforms like Polkadot create new opportunities for digital asset ownership and cross-chain gameplay.

Polkadot Token 2049 and Decoded Asia 2024: A multichain ecosystem in action

At Token 2049 and Decoded Asia 2024 in Singapore, Polkadot teams and contributors showcased a multichain future for real-world applications. Key moments included Dr. Gavin Wood’s vision for digital individuality, Chrissy Hill’s regulatory insights, and announcements from emerging projects shaping the Web3 ecosystem.

What is a crypto wallet? Your all-access pass to the future web

In Web3, your wallet is your most valuable digital tool. It’s more than just a place to store, send, and receive cryptocurrencies securely—it’s your passport to the decentralized world.