From Day 1 of launch on both @arbitrum and @fuellabs_,
Directional Liquidity will enable Liquidity Providers to capture profit and market strength with less maintenance.
So what is Directional Liquidity and how can it be leveraged?
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Directional Liquidity at the protocol layer allows users to trade in a single direction as a one-time position.
It allows for 'Buy and Hold' strategies as an LP, which means your desired token amount is "locked in" the moment someone trades against your position.
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Two key innovations will launch for v1:
- Hedge Pools š
- Price Pools š
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Hedge Pools work by slowly transitioning out of an asset in the same spirit as Range Orders, except they trade in the opposite direction.
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Use cases:
- Cover Impermanent Loss as the price changes
- DCA into a large position without high price impact
- Unwind a leveraged position with low price impact
- Rebalance LP position at any time with minimal IL
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Why is this so cool?
Because it allows you to effectively have a stop-loss position as a Liquidity Provider fully on-chain, something current AMMs are not capable of doing.
It also completely handles the slow unlocking of liquidity as the price changes.
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Time of claim has no impact, as the output is locked in the position.
This mechanism allows you to do something users have never been able to do before with ease:
Spread a buy or sell over a range, which is akin to a Dollar Cost Average or DCA strategy.
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Basically what @0x_emperor said except:
A) No gas fees because your LP position sits on-chain for you
B) No MEV or front-running for the LP since other users are trading against your liquidity position
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twitter.com/0x_emperor/status/1600765558517297155
The main use case for Hedge Pools is of course to Cover IL for current LP positions on Uniswap v2/v3, Curve, Sushiswap, and others!
Here is a sneak peek of our Cover UI which will initially support Uniswap v3:
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In order to additionally support users of Curve.fi and Sushiswap, we will be leveraging @redstone_defi to provide real-time data from these pools.
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The Uniswap v3 compatible Hedge Pools will use a long-form TWAP sample directly from the Uniswap v3 contracts to decide what liquidity should be unlocked.
This prevents the pool from triggering liquidity unlocks too early.
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As our community evolves we will be able to leverage more and more data to improve the parameters set in these pools to achieve the optimal outcome for the largest set of users.
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Brief history lesson:
With the release of @Uniswap v3, users could leverage the concept of Range Orders to employ LP positions as Limit Orders.
The key missing piece was that it was not a 'one-time position'. You needed to go race to close that position.
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Likewise, you could not trade against the market without manually going and opening up new Range Orders each time the price moved.
Though @Uniswap v3 was a key innovation in the landscape of Constant Product AMMs, these limitations were still in place.
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It is unlikely that our future destiny in web3 is to stay parked on L1 Ethereum.
Though Directional Liquidity is built for Ethereum Mainnet...
We will navigate to other L2s and Virtual Machines that are Customized Execution Environments.
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This is where we believe @fuellabs_ will come into the picture and has the potential to offer more scalability and optimization than any other Virtual Machine on the market...purely for execution.
Key features:
- Zero token approvals ā©
- Sub second block times š¤
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In the next thread we will cover Price Pools, which enable Price Priority and bunch of other cool things.
For now, you can follow us on Twitter or join our Discord below š
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If you'd like to get more involved in the Poolshark community, please join our Community Call #1 tomorrow within our Discord:
discord.gg/tmZrDXjmsd
Come plug us with any questions! š«”š¦
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You can read the unrolled version of this thread here: typefully.com/poolsharks_labs/INfy6aL
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