(Slippage Analysis & Market Impact Framework)

This section outlines Kambria’s Liquidity Protection Model for KAT POL, designed to ensure stable and orderly trading behavior on decentralized exchanges (DEXs) during the early liquidity phase. With intentionally minimal initial liquidity, Kambria implements mechanisms to mitigate slippage, discourage manipulative behavior, and promote fair access for all participants.

This model works alongside the Fair Conversion & Market Integrity Policy to maintain price stability and market integrity throughout the migration to Polygon.

1. Purpose of the Liquidity Protection Model

The early liquidity environment for KAT POL is characterized by:

• Small seed liquidity (2,000 USDT + KAT POL)

• Low initial trading depth

• Manual conversion inflow

• High risk of price distortion from sudden trades

• Sensitive community perception during migration

Kambria’s Liquidity Protection Model ensures:

1. Stable price discovery

2. Predictable and smooth movements

3. Protection against sudden dumps or spikes

4. Fairness for all community members

5. Support for long-term token utility (DAOs, privileges, contributions)

The model uses a combination of liquidity parameters, conversion constraints, and slippage analysis to safeguard the ecosystem.

 

2. Initial Liquidity Configuration

DEX Setup (Uniswap v3 – Polygon)

• Pair: KAT POL / USDT

• Reference Price: 1 KAT = 0.00003 USDT

• Fee Tier: 1%

• Price Range: Full Range

• Seed Liquidity:
  • 2,000 USDT

  • 66,666,666 KAT POL

This configuration intentionally creates:

• A slow-moving price curve

• A wide liquidity spread

• A high slippage environment for large orders

This acts as a natural defense against manipulation or opportunistic trading behavior.

 

3. Slippage Dynamics in Low-Liquidity Pools

Slippage refers to the difference between the expected price and actual execution price during a trade.

In a small liquidity pool, slippage grows non-linearly as trade size increases.

Illustrative Slippage Model (Approximate)

Assuming 2,000 USDT liquidity at reference price:

Trade Size (USDT)	Expected Slippage	Notes
$10	<1%	Normal retail trade
$50	2–5%	Noticeable movement
$100	10–15%	Significant movement
$200	30–40%	Large users discouraged
$500	60–80%	Price distortion
$1,000	>90%	Curve collapses toward boundary

These values are illustrative; actual slippage is determined by the AMM math and current pool state.

Key Insight

The pool is intentionally not deep enough for large trades without severe slippage.

This acts as a market-based protective measure:

• Discourages whales from dumping aggressively

• Prevents early-stage volatility

• Keeps trading activity organic

• Protects fair price discovery

 

4. Liquidity Protection Mechanisms

Kambria applies the following protection mechanisms to maintain stability:

4.1 Small Initial Liquidity + Wide Range (Full Range)

• Ensures continuous active liquidity

• Minimizes inactive range risk

• Price absorbs only gentle shifts

• Sudden trades face steep slippage

This configuration is designed to disincentivize large speculative trades during the migration phase.

4.2 Monthly Conversion Capacity (5M KAT)

By limiting KAT → KAT POL conversions to 5,000,000 KAT per month:

• The ecosystem cannot be flooded with new supply

• Selling pressure is naturally rate-limited

• Price impact is spread evenly over time

• Whales cannot overwhelm liquidity suddenly

This significantly reduces potential downward volatility.

4.3 Small-First Request Ordering

Conversion requests are sorted from small to large:

• Community users with small holdings convert first

• Large holders convert later, spread across months

• Liquidity remains stable because inflows are gradual

• Prevents whales from capturing full capacity early

4.4 Unique Burn Transaction Requirement

Each conversion requires a separate burn transaction:

• Increases friction for large holders

• Discourages splitting into many small requests

• Ensures authenticity of intent

• Reduces sudden supply inflows from coordinated wallets

4.5 Manual Minting & Monitoring

Kambria uses manual treasury review, not automated minting:

• Allows humans to intervene if a suspicious pattern emerges

• Prevents automated mass conversions

• Ensures accuracy of burn verification

• Maintains accountability and transparency

 

5. Combined Model Effect

Together, these mechanisms create an environment where:

✔ Large dumps are economically irrational

High slippage + monthly conversion limit = large sales are unprofitable.

✔ Manipulation becomes operationally difficult

Multiple wallets, splitting requests, or coordinated attacks are slowed or blocked.

✔ Price discovery is slow but stable

This is ideal during migration.

✔ Community experiences predictable behavior

No sudden shocks or inexplicable price crashes.

✔ DAO utility development proceeds safely

Core focus shifts toward building long-term KAT utility without market chaos.

 

6. Upgrade Path for Future Liquidity Phases

As KAT POL adoption grows through DAOs and partner utilities, Kambria may transition to:

• Additional liquidity pools (e.g., KAT/MATIC on QuickSwap)

• Increased liquidity depth

• More efficient v3 ranges (tighter bands)

• Market-making partners who match the integrity-first philosophy

This migration model is not permanent.

It is designed to protect the ecosystem until real usage and organic liquidity growth emerge.

 

7. Summary Table

Component	Configuration	Purpose
Initial Liquidity	2,000 USDT + KAT	Slow, stable early price discovery
Price Range	Full Range	Always active liquidity, low maintenance
Fee Tier	1%	Deters aggressive trading
Slippage	High for large trades	Prevents manipulation and dumping
Conversion Limit	5M/month	Controlled supply release
Request Ordering	Small → Large	Protects small holders
Burn TX Rule	Unique TX per request	Prevents batching / abuse
Minting	Manual	Ensures integrity and oversight