GM!
DeFi projects today encounter obstacles when it comes to establishing and handling liquidity, which can hinder their expansion and adaptability.
Imagine a solution that enables single-sided LP. Introducing @artichoke_fi and its innovative mechanism
Let's delve into it!
Disclaimer:
Kindly be advised that this thread is intended solely for the purpose of sharing information and should not be construed as financial advice.
Disclosure:
This thread was created in partnership with the @artichoke_fi team.
Preparatory Reading:
For a more comprehensive understanding of the subject matter being discussed, we suggest acquainting yourself with the following topics through pre-reading:
š¢ Some topics are briefly explained in the Pointer section
Table of Contents
š¢ AMM Challenges
š¢ DeFi Growth Obstacles
š¢ @artichoke_fi Resolutions
š¢ Delta-Zero Mechanism
š¢ Embedded Options in AMMs
š¢ LP as Short Straddle
š¢ Bidirectional Hedging
š¢ Omnipool Technology
š¢ Single-Sided LP Provision
Automated Market Makers (AMMs) ecosystems serve as decentralized liquidity providers.
While these aim to optimize financial efficiency, the complexities and the management can present substantial obstacles for early-stage DeFi projects, impeding their growth and potential.
Conventional liquidity provision methods often require projects to offer token pairs, which poses challenges for new projects in attracting adequate liquidity.
Many nascent DeFi projects rely on initial incentives, but they come with high costs and may not be sustainable.
@artichoke_fi seeks to tackle these concerns through the development of a one-sided LP protocol designed for staking assets.
With this approach, users can stake their assets without the requirement of supplying stable, USD-pegged liquidity for the protocol.
This approach has the potential to simplify the creation of strong liquidity pools for new projects.
By reducing the reliance on extensive initial incentives and enhancing the efficiency of the process, it enables the establishment of robust and resilient liquidity pools.
The forefront of @artichoke_fi protocol features the Delta-Zero mechanism, which reimagines hypothetical embedded options in LPs.
This innovative approach enables bidirectional hedging for LPs and introduces Omnipool capabilities for creating single-sided LPs.
Traditional AMMs like @Uniswap naturally engage in dynamic hedging.
When the assets in a liquidity pool change in price, the protocol adjusts their reserves accordingly. It mirrors the negative delta of long put options, with LPs holding a short put position.
These embedded options diverge from traditional finance options because of the perpetual characteristic of the constant product formula in AMMs.
In addition, it is worth noting that LP provision can be conceptualized as a perpetual short straddle strategy.
This is because, in the context of AMMs algorithm, LP acts as a short put for one asset (X) and a short call for another asset (Y) as explained below:
This concept forms the foundation of the Delta-Zero mechanism employed by @artichoke_fi.
The attainment of a delta-neutral state is accomplished by including a Long Straddle strategy in the LP, along with utilizing Omnipool to enable the creation of single-sided LP.
Delta-Zero Omnipool allows users to create single-sided LPs by utilizing a virtual omnipool as trading pairs.
In this example, there are two main participants: the X project, which locks its X token, and the $USDC liquidity providers who create the virtual Y omnipool.
The primary goals:
@artichoke_fi strives to utilize the Delta-Zero mechanism and the Omnipool to enable a smooth single-sided LP experience for both DeFi projects and users. This enables them to enhance growth and optimize the capital effectively.
References (Link in ALT)
Pointer 1: Short & Long Put Options
Pointer 2: Long & Short Straddle
Pointer 3: Options Greek Brief Overview
Tagging friends who might be interested in @artichoke_fi:
@blocmatesdotcom
@rektdiomedes
@ChadCaff
@Flowslikeosmo
@stacy_muur
@defi_mochi
@Slappjakke
@crypto_linn
@Cryptotrissy
@Crypt0_Andrew
@ArbiAlpha
@LouisCooper_
@Defi_Neo
@defiwizzy
@SherifDefi
@crypto_condom