Helpful or Riskier? Directional LP by Maverick | TKX Weekly
Part I. Maverick
Capital efficiency is always a topic in DeFi and projects have been trying different ways like flash loans, composability, etc. to improve their performance. Maverick Protocol is a DeFi protocol that wants to improve capital efficiency through a more customised Automated Market Maker (AMM).
Maverick AMM helps its users maximize capital efficiency by automating the concentration of liquidity as price moves. Higher capital efficiency leads to more liquid markets, which means better prices for traders and more fees for liquidity providers. Liquidity providers can also now choose to follow the price of an asset in a single direction, effectively making a bet on the price trajectory of a specific token.
Problem #1: Concentrated liquidity doesn’t mean capital efficient
Although Uniswap V3 has developed concentrating liquidity (range AMMs) which is a game-changer for capital efficiency compared to Uniswap V2’s constant product AMM, the problem with concentrating liquidity is it decreases efficiency as prices move out of areas of concentration.
Range AMM is only capital efficient while the price remains in the area of concentration, once the pool price moves out of the range, the LP goes from high efficiency to zero efficiencies.
If LP wants to remain capital efficient, they have to move its liquidity to a new range which costs extra time and gas fees.
Problem #2: Current native AMMs are built for a sideways market
With any existing AMM in the DeFi, an LP makes an implicit bet that the price of the pair of assets in their pool will go sideways, enabling them to collect trading fees without the ratio of their deposited assets shifting significantly, in other words, impermanent loss (IL).
If the price moves in any direction other than sideways, LPs will suffer a loss when the IL is larger than the fees they collected. IL is a common issue to LP that they bet the price goes sideways in default which results in an impermanent loss. They don’t even have the option to make a simple bet if the asset price goes up or down.
Problem #3: LPs can’t control their own liquidity
Existing range AMMs like Uniswap V3 let LPs define a price range for their liquidity and then the AMM distributes their liquidity for them across that range — uniform distribution.
Therefore LP’s liquidity is flat across the range, with no efficient means for them to arrange a different kind of distribution. This limits potential LPs with different strategies who might be more willing to commit their capital to pools if they had more control over how it was distributed.
Solution: Maverick AMM
What Maverick AMM does:
- Automatically manage and rebalance liquidity around the trading price
- The first and only AMM that provides native directional LP
- Concentrated liquidity with customized liquidity distribution
Maverick is an AMM where LPs can create a bin and specify how that liquidity should move as the price moves. Its smart contract natively shifts liquidity as often as each swap so that LPs can keep their capital working regardless of the price. LPs can select from a variety of liquidity shifting modes that do the work of monitoring prices and re-concentrating liquidity for them.
For each position they open in a pool, an LP can choose to stake one of four modes. The mode choice dictates how their range and the associated liquidity move with the price: Static, Right, Left, and Both.
For example, if LP is bullish on the price, they should choose Mode Right. If the bet is correct, as the price swaps past the edge of the active bin, the bin will go from being a mix of both assets to holding only one asset: either all base tokens or all quote tokens. In this state, the liquidity in that bin can be moved freely to a new bin that is closer to the price or mixed with other single-asset bins.
The purple boxes below are the bin/liquidity. As the price continues up, liquidity moves further right (up). The areas where the pink line overlaps with the purple box are active liquidities.
Also, Maverick lets LPs configure their distribution of liquidity along a pool’s price range. Maverick provides several pre-designed distributions, but an LP can also work bin-by-bin to tune its custom liquidity strategy.
Who should use Maverick?
- For LPs: Firstly, with Maverick automating the re-concentration of liquidity, LPs can use an active liquidity strategy without constantly managing the liquidity to save time and gas fees. Secondly, automated re-concentration can improve capital efficiency, which means LPs can collect more fees. Lastly, Maverick AMM offers custom liquidity distribution to LPs. LPs can place their liquidity in every pool and apply a more efficient strategy.
- For traders: Maverick AMM ensures there is always a broad base of liquidity support around the market price by re-concentrating liquidity. Traders can enjoy a better price and lower slippage.
- DAO treasuries: Maverick AMM offers projects with low-maintenance market making. It bootstraps liquidity for the new launch and protects against volatility and market manipulation. In addition, Maverick’s easy liquidity distributions can be used to guide the market to the desired price for the token, while rewarding early adopters for supporting the project.
Indeed, Maverick AMM solves the IL problem for certain LPs while improving capital efficiency. However, you might notice that the IL risk is replaced by LPs betting for directions. There is still some study required for LPs to properly hedge their risks. Maverick can build a simulating function to let users better understand their risks and takes.
For new project tokens, Maverick’s directional token might be able to help tokens better manage their prices. Maverick can be potentially useful, especially for DAOs and projects.
Part II. Market Updates
U.S. Justice Department weighs charging Binance and its executives: Reuters
The U.S. Justice Department is continuing to weigh up charging crypto exchange giant Binance for possible money laundering and criminal sanctions violations, according to Reuters. It is also looking into the exchange’s top executives, including CEO Changpeng Zhao (CZ).
Sam Bankman-Fried charged with fraud over FTX collapse
Sam Bankman-Fried was charged with fraud by the U.S. Securities and Exchange Commission over the collapse of FTX, the crypto exchange he founded. The former CEO was charged with “orchestrating a scheme to defraud equity investors in FTX Trading Ltd.
Hong Kong’s New Bitcoin and Ether Futures ETFs Raise $79 Million in Trading Debut
Asset manager CSOP says its bitcoin and ether ETFs have raised nearly $79 million as they debut today on the Hong Kong stock exchange. They will be the first listed bitcoin and ether futures ETFs available in Asia, according to CSOP.
PayPal Working With Crypto Wallet MetaMask to Offer Easy Way to Buy Crypto
PayPal will integrate its buy, sell and hold crypto services with MetaMask Wallet as the companies look to broaden users’ options to transfer digital assets from their platforms.
Binance CEO Changpeng ‘CZ’ Zhao Warns Staff of Turbulent Times
Binance Chief Executive Officer Changpeng “CZ” Zhao has warned his staff to expect turbulent times ahead as the giant crypto exchange sees a wave of crypto outflows amid concerns about its financial health, according to an internal memo.
Part III. Fundraising News
Nillion — Non-blockchain decentralized network
Raised $20M in a funding round led by Distributed Global. Other investors include AU21, Big Brain Holdings, Chapter One, GSR, HashKey, OP Crypto and SALT Fund.
Astrolab — Next-Generation Omnichain Yield Aggregator
Raised $0.5M in a pre-seed funding round. Other investors Apollo Capital, Jane Street, 0xVentures and Upside DAO.
Forum3 — Digital collectibles firm
Raised $10M in a seed funding round led by Decasonic. Other investors include Bloccelerate, Liberty City Ventures, Arca, Polygon Ventures and Valor Siren Ventures.
Outdefine — Decentralized hiring network
Raised $2.5M in a seed funding round led by Jump Crypto and TCG Crypto, with participation from Big Brain Holdings, Formless Capital, Blocore and others.
NF3 — NFT exchange
Raised $1.65M in a seed funding round led by Infinity Ventures Crypto and Spartan Group. Other investors include DWF Labs, Saison Capital and others.
About TKX Capital
Build with us: HI@TKX.CAPITAL
Note: TKX Capital do not offer any financial advice for retail investors and we have no affiliation with projects in this research.