Our market and ecosystem analysis has shown that the DeFi ecosystem is currently limited to DEXs that function similarly to traditional DEXs, resulting in the problems we previously mentioned.
We have a unique approach to address these problems: Protocol-managed liquidity.
Firstly, if liquidity is managed by a protocol itself, a completely different pool architecture is required: Single-sided liquidity providing possibilities, multiple assets per pool, and flexible asset weightings. This architecture alone is already less exposed to impermanent loss as the Curve and Balancer approaches prove.
Secondly, based on this architecture, we invented the feature smart liquidity routing, in short terms SLR. SLR collects liquidity in SLR pools and our protocol then directs this liquidity towards multiple pools where the liquidity is needed and can be used in the most efficient way. This results in a way simpler user experience for liquidity providers as they only have to deposit one single token in order to provide liquidity to multiple pools, which reduces their impermanent loss risks due to pool diversification and boosts the APY due to intelligent liquidity management and auto-rebalancing.
For the protocol itself, it means that liquidity is linearly spread across all pools, which is way healthier than pool-concentrated liquidity.
Thirdly, we think that this is not enough and there is more room for improvements. The important question is: Why can’t a protocol provide liquidity at exactly that moment when liquidity is needed? Why does liquidity just wait in the pools that a trade gets executed? Our feature smart liquidity front-running does exactly this: Our SLR strategy bot screens all pools and the triggered trades within them. If the bot detects a large trade that would lead to an unacceptable price impact and slippage above 0.2%, it directs liquidity via front-running mechanisms to that pool before the trade gets executed.
There is one good real-world analogy: Imagine buying a pair of shoes. You wouldn't wait the whole day in front of your door as you’re expecting the delivery, instead, you will open the door when the bell rings. Exactly this applies to our liquidity management approach. By doing so, our protocol can maintain close to zero price impacts or slippage and the liquidity is used in the most efficient way with the highest theoretically possible APY.
At the same time, the overall liquidity or TVL that is required for our protocol to be smoothly operating is around 80% lower compared to traditional AMMs.
Fourthly, an additional APY boost, our liquidity pools and SLR pools are using margin liquidity, which is liquidity leveraging by utilizing money markets. Margin liquidity is scientifically proven 8k times more capital efficient compared to Uniswap V3.
To wrap it up, we created the first DeFi ecosystem that enables frictionless experiences for both parties: traders and liquidity providers.