Categories
DeFi tools

Tezos Mumbai upgrade: Increased scalability and faster block times

Tezos, a decentralized blockchain platform, has been making waves in the crypto space for its innovative solutions and commitment to continuous improvement.

One of the most recent developments in the Tezos ecosystem is the Mumbai Upgrade, which has brought significant changes to the platform. In this article, we will take a closer look at the Mumbai Upgrade, its features, and the benefits it brings to the Tezos community, developers, and investors.

The Mumbai Upgrade

The Mumbai upgrade was activated on 17th January 2023 and brought three significant innovations to Tezos. First, intelligent rollups become officially available on the Tezos blockchain. Second, the validity roll-up solution, named Epoxy, is introduced on the Mondaynet testnet. And third, the block time is reduced to 15 seconds, making the Tezos blockchain even faster.

Smart Rollups on Tezos

The activation of smart rollups in Mumbai is the result of a year-long effort by the Tezos development team. Smart rollups offer a powerful scaling solution for the Tezos blockchain by allowing anyone to deploy decentralized WebAssembly applications with dedicated computational and networking resources.

With the Mumbai upgrade, smart rollups have been improved in several ways, including a shared global inbox for all rollups, access to external data sources, and compatibility with the Data-Availability Layer (DAL).

Epoxy

Validity Rollups on Mondaynet Validity rollups, also known as ZK-rollups, will be introduced to Tezos with the Mumbai upgrade. Epoxy implements validity rollups on Tezos and allows for instant finality due to SNARK’s proof of validity.

This will enable the development of privacy-preserving solutions that do not rely on Tezos’ Layer 1 for publishing and distributing data. The first instance of a validity rollup, handling tickets, will be originated on Mondaynet.

15 Second Block Times

The Mumbai upgrade will also bring faster block times to Tezos, reducing the minimal time between blocks from 30 seconds to 15 seconds.

This is made possible by the validation pipelining project, which separates the validation from the application of blocks and operations.

This optimization allows blocks and operations to be propagated faster, giving the Tezos development team confidence to safely reduce block times.

So, what’s the significance?

The Mumbai Upgrade brings several benefits to the Tezos ecosystem, including increased scalability, improved security, and faster block times. These improvements will make Tezos a more attractive platform for users, developers, and investors.

One of the key benefits of the Mumbai Upgrade is the increased scalability of the platform. With the introduction of Smart Rollups on the main net, the Tezos network will be able to process a higher volume of transactions per second, making it more efficient and scalable.

This will make it easier for users to transact on the platform, and it will also make it easier for developers to build decentralized applications on Tezos. 

The zk-rollup solution on the Tezos testnet is designed to provide a testing environment for developers to experiment with the technology and to help identify any potential issues before it is rolled out to the main net.

This will ensure that the solution is robust and secure before it is adopted by users.

Another key benefit of the Mumbai Upgrade has improved security. The implementation of Smart Rollups on the mainnet reduces the risk of double-spend attacks, making the Tezos ecosystem a more secure place for its users.

The zk-rollup solution on the testnet also adds another layer of security to the platform, especially in the DeFi space where privacy is becoming increasingly important.

XTZ going Bazooka!

The Tezos community has been eagerly anticipating the Mumbai Upgrade, and the launch has been met with positive reactions from both the community and the market.

Since the announcement of the upgrade, the price of XTZ, the native token of Tezos, has risen, reflecting the excitement and optimism surrounding the launch.

As the Tezos ecosystem continues to evolve and improve, it is expected that the demand for XTZ will continue to grow.

Moving forward…

The Mumbai Upgrade is just the latest in a series of developments that have helped to establish Tezos platform in the crypto space.

The Mumbai Upgrade is a significant step forward for the Tezos ecosystem, and it is set to bring several benefits to the platform and its users.

From increased scalability and improved security, to faster block times and a new zk-rollup solution, the Mumbai Upgrade represents the future of the Tezos ecosystem.

The positive reactions from the community and the market demonstrate the potential of Tezos and commitment to continuous improvement.

As the platform continues to grow and evolve, it is expected that it will attract more users, developers, and investors, making it a leading player in the decentralized finance space.

Categories
DeFi tools

Scatter: Token distribution tool on Tezos

Scatter, developed by Instaraise, is the token distribution tool on the Tezos blockchain. This tool has been designed to make it easier for community members to distribute crypto tokens and interact with Decentralized Finance (DeFi) applications on Tezos.

FA1.2 and FA2 support

Multiple Token Standards: Scatter supports multiple token standards, such as FA1.2 and FA2, which makes it incredibly flexible for different use cases.

This feature allows users to send and receive different types of tokens on the Tezos blockchain, without the need for multiple tools or platforms.

A simple UI

The user interface of Scatter is clean and simple, making it incredibly easy for even non-technical users to use. The platform is intuitive, and users can easily send and receive tokens with just a few clicks.

The clean and simple design of the platform makes it easy for users to navigate and understand the features and options available to them.

Easy Usability

Scatter is designed with ease of use in mind. The platform has been built to make it easy for users to send and receive tokens, even if they are new to the world of cryptocurrency.

The platform also has a user-friendly interface that makes it easy for users to navigate and understand the features and options available to them.

Bulk token sharing with CSV upload

One of the most innovative features of Scatter is the option to upload a CSV file of token addresses to send tokens in bulk. This feature is incredibly useful for those who want to distribute tokens to multiple addresses in a single transaction.

It saves time and eliminates the need for manual entry of addresses, which can be time-consuming and prone to errors.

The platform is packed with features that make it easy for users to send and receive tokens, even if they are new to the world of cryptocurrency.

Scatter is a must-have tool for anyone looking to interact with DeFi applications on the Tezos blockchain.
Categories
DeFi tools Dev updates

Instaraise Q1 Q2 2023 Roadmap- Road to Defi Upliftment

At Instaraise, we have been focused on building and uplifting the DeFi ecosystem on the Tezos blockchain. We have a long-standing history of contributing to the growth and development of the Tezos community.

2022 has been a great year for Instaraise as we have been focusing on building various Defi tools while combating the market conditions to empower Tezos with Industry standard Defi features that are not yet available on the blockchain.

In the first quarter of the year, we are bringing all these products and tools forward which are specially designed for the Investors, Community members and Defi users of Tezos.

Scatter your tokens easily

The first event planned for Q1 is the launch of Scatter, a token distribution tool that makes it easy for users to disperse tokens to multiple addresses.

Scatter is designed to simplify the process of distributing tokens, making it more accessible for people to participate in token sales. The tool is built on the Tezos blockchain, and it supports multiple token standards, such as FA1.2 and FA2, making it flexible for different use cases.

Scatter will also supports the use of smart contract-based Tezos token distributions, allowing for more advanced use cases.

A fresh new website

Another major event planned for Q1 is the launch of a new Instaraise website.

The new design will make it easier for users to navigate the Instaraise platform and access all of the features and services that the we offer.

Additionally, the website will have a comprehensive section dedicated to educational resources such as videos and articles, providing users with the necessary information to learn about the DeFi ecosystem and latest updates around Tezos blockchain.

Initial NFT Offering platform

In addition, Instaraise is also set to launch a new Initial NFT offering platform for Clean NFT artists. This new platform will provide a new way for NFT artists to monetize their work and access new audiences.

The platform will enable artists to monetize and generate funds before the launch of their NFT in the open market.

This will create a new revenue stream for artists and promote the use of the Tezos blockchain in the NFT space.

InstaDEX mainnet launch (Yes, its finally coming :))

Another exciting event planned for the first part of the year, highly anticipated from past one year is the launch of InstaDEX. A unique, first of its kind decentralized exchange on Tezos with impermanent loss protection and single-asset liquidity provisioning

InstaDEX will greatly reduce liquidity provider’s loss and make trading on Tezos more secure and efficient. InstaDEX will introduce a new way for users on Tezos to trade tokens and other digital assets on the blockchain, further promoting the growth of the DeFi ecosystem.

This will create a new trading venue for Tezos-based assets and promote liquidity in the Tezos market.

A self hosted IDO platform

Finally, Instaraise will be updating the existing IDO launchpad into a self hosted IDO platform, which will allow new projects to easily launch their token IDO on our platform. This new feature will enable projects to host their own IDO on the Instaraise platform and set everything up easily.

The self hosted IDO platform will give new projects the ability to create a token sale in an easy and efficient way, which will be a great opportunity for projects to raise funds and introduce their idea to the community.

The Vision

The advancements and developments planned by Instaraise in Q1 and Q2 of 2023 demonstrate our commitment to building a stronger and more vibrant Tezos community, and making it easier for people to participate in the DeFi ecosystem on Tezos.

From token distribution tools like Scatter to educational resources on the new website, and from Initial NFT offerings to the launch of InstaDEX, the company is working to provide a wide range of services and products for the community, investors, Hodlers and new projects on Tezos.

As Instaraise continues to focus on community and building Tezos DeFi, these developments will play a vital role in promoting the growth and adoption of the Tezos blockchain.

 

Categories
DeFi tools Dev updates Events

Falcon- InstaDEX public Testnet release

Instaraise is beyond thrilled to release the Pubic testnet version of our Decentralised exchange on Tezos. Falcon has just landed on earth and anyone from Tezos community can now experience the new innovation that has come in Tezos DeFi ecosystem.

Falcon is the public testnet version of our upcoming InstaDEX which is the closest to the mainnet version of the DEX.

We proudly present the Tezos community our Public testnet version of InstaDEX which is packed with features that are never seen before in Tezos Defi.

  • The Impermanent loss protection in InstaDEX, will ensure that the community is encouraged for their efforts and not penalized by forcing them to accept impermanent loss under volatile market conditions.
  • Single asset liquidity provisioning will attract more liquidity into Tezos DeFi ecosystems allowing LPs to make greater sums. As liquidity increases, users across DeFi protocols can swap for needed tokens easily with no worries of slippage and interact with plenty more use cases and applications.

Dive deep into the inspiration and technical aspect of InstaDEX.

InstaDEX Lightpaper ➡️https://docsend.com/view/xag2x6m7t7ehi5vy

InstaDEX Overview➡️https://blog.instaraise.io/introducing-instadex/

At Instaraise, the security of our users is our number one priority. As such, we strive to provide the most secure platform possible.

Although our Devs are doing their best to find every possible vulnerability on our platform, there is always a slight possibility that a few of them could have been overlooked. Thus, we decided to introduce a bug bounty program.

Any Tezos community member can take part in the program and earn rewards by reporting the bugs they find in our public testnet version of our DEX.

Falcon Bug Bounty program

This section will give you an overview of the InstaDEX Bug Bounty Program. Please make sure you keep the ruleset in mind before investigating any issues

We will evaluate reported security issues based on the security impact to our users and the Instaraise ecosystem.

As a Bounty hunter, you will also be the early adopters of InstaDEX and a part of the Instaraise’s effort to improve Tezos DeFi. In this program you will be helping us in testing ins and outs of the DEX.

Eligibility

Since this is a public event, anyone who is willing and interested to help in building and bringing new innovation to Tezos Defi is welcome to come forward and help us on the same journey.

Scope

Our DEX has 4 main features that will be your focal points while testing which are:

Swap, Tokens, Liquidity and Faucet.

As a Bug hunter, you will be required to test Skywalker and hunt down any bugs or security concerns that might be critical for the development of the DEX

Apart from this, you are welcomed to provide your valuable suggestions and ideas that can further improve DEX functionalities. Your suggestions and feedbacks can range from UI/UX improvements, your experience with the whole DEX etc.

How to begin?

To kickstart with the testing of our DEX please visit:

 ➡️ alpha.instaraise.io

Load the testing tokens to your wallet with the Ghostnet Network via our Faucet feature. You can refer to this Video for reference: faucet

Your main objective post loading the tokens will be to test out the Swap Tokens and Liquidity features in our DEX.

(Don’t forget to toggle the Day/Night mode of the website according to your convenience)

Rewards

Total 5 winners will be selected on the basis of the criticality and the vulnerability of InstaDEX due to the bug. All the winners will share prize pool of 2000$ worth of XTZ equally ($400 each)

The distribution of the rewards will be done right after the Mainnet launch of InstaDEX

Bug Reporting

Submitting the bugs and feedbacks is as easy as posting a tweet!

After testing the ins and outs of the Falcon, you can report the bug or your feedback by simply sharing them via individual tweets or a tweet thread on Twitter with proper screenshots/videos supporting your report.

If, anyhow you are unable to find any bugs, you can even share your review about the Falcon via tweet which will be equally significant.

Make sure that you tag “@instaraise” in your tweet along with the hashtag #InstaDex and #Tezos for us to find your tweet easily.

TIP- The more elaborated and well explained is your tweet, the higher is your chance of winning!

For any other queries related to the program, contact us directly on the Instaraise official telegram community channel where our admins are always ready to help you.

Criteria for Rewards

Winners will be selected on the basis of

  • The criticality of the bugs and issues found out during your testing
  • Significance of your feedbacks for the development of the DEX
  • The level of deep testing done by the testers which will be interpreted by the quality of your bug and feedback tweets

Good luck, happy testing and many thanks to you all for ensuring that our DEX goes out smoothly with all the best of feedbacks and suggestions incorporated.

Categories
DeFi tools Events

Insta Mascot NFT design contest- Unleash your creativity!

Are you an NFT artist? Are you the most creative guy in your circle? Do you have an eye of great imagination and hands of an artist? Do you want your art to be the face of Instaraise? If you have “Yes” as an answer for any of the above question then we have got some great news for you!

Instaraise is here with a great opportunity for NFT artists on Tezos to be a part of “Insta Mascot Design Contest”

How do you perceive Instaraise if it was a living being? A bull? A Deep sea fish? An alien from outer world loving the advance blockchain, Tezos? YOUR imagination is the limit!

Let your creative juices flow and design the best version of Instaraise Mascot.

Note: Please note that this contest is to create an NFT art, not minting an actual NFT.

Winners are in for $INSTA rewards and additional perks!

The winner of the Insta Mascot design contest will receive $50 worth of $INSTA tokens. But, That’s not it!

The winner will also be called upon to design the final Insta Mascot limited edition NFT series which will be minted live at the time of InstaDEX mainnet launch.

Also, there will be 2 runner ups arts which will receive $15 worth of $INSTA tokens each.

How to submit?

Follow the steps below to enter the contest:

  1. Follow Instaraise on Twitter and Telegram
  2. Retweet this tweet and share your art on twitter with the hashtag #MyInstaMascot and #Tezos to let us know that it is your entry. Also, include your Telegram Username in the tweet. Don’t forget to give your piece a title!
  3. Use this resource folder for Instaraise logo
  4. Submissions may come in JPG, PNG, or GIF (Max 50MB) OR MP4, MOV, WEBM, WMV (Max 100MB and limited to 3 seconds)
  5. Try to keep your design simple yet eye catching that matches the aesthetics and theme colours of Instaraise.

Entries will be accepted till 20th December,2022, after which the team will pick top-5 art designs.

The 3 winners will be chosen by the community via polls, which will run on official Instaraise twitter account and Telegram channel. This poll, along with the number of likes & Retweets on your entry on Twitter will determine the 3 winners of the contest!

Rules:

  1. Make sure to not copy your design from anyone else’s art, doing this will disqualify your entry
  2. Entries without hashtags will be unable to reach out and hence won’t be considered

We can’t wait to see what you come up with in your new Insta Mascot designs! Let your creativity take you to new heights!

Categories
DeFi tools Research

Understanding Single Sided Liquidity Pools – Why Defi Needs This Solution?

A liquidity pool is a smart contract implementation on AMM DEXs that allows users to provide liquidity to DeFi markets in exchange for transaction fees and rewards.

DeFi is an emerging wing of finance that brings to the world innovative investment tools with a variety of applications and significant profit making opportunities over short intervals of time. The potential of DeFi has attracted the participation of investors from across and beyond the crypto community.

The myriad use cases of DeFi extend beyond financial incentives to establish a solid alternative to traditional financial solutions, with an added advantage of higher transparency, increased control and affordability. As a result, it is not surprising to witness the exponentially increasing popularity of DeFi applications.

Widely used applications like DEXs, stablecoins, lending and borrowing protocols, and more are key drivers of DeFi adoption. These protocols, eliminating the need for middlemen, rely on peers for liquidity and on-chain smart contracts for transaction execution.

Whether the desired goal is to hoard tokens in wallets or put them to use to generate passive income, liquidity is necessary for users to acquire the cryptocurrencies of their choice. A solution for this need is the liquidity pool native to the DeFi landscape.

What Is a Liquidity Pool?

A liquidity pool is a digital supply of cryptocurrency that is secured by a smart contract. As a result, liquidity is produced, allowing for quicker transactions.

Users providing liquidity, known as liquidity providers (LPs), stake tokens into liquidity pools in pairs, often in the 50:50 ratio. Although these are the most popular kind, different types of liquidity pools exist in varying ratios.

Staking tokens in pairs is a necessity due to how the liquidity pool uses AMM algorithms that bring efficient market-making capabilities on-chain. Such type of liquidity provisioning was made possible by the first-ever AMM DEX – Bancor.

Subsequently, it was made popular thanks to Uniswap which remains one of the most popular among AMM DEXs, reporting the largest trade volumes for an application of its kind in the DeFi space.

Liquidity Pool Trading

To understand how liquidity pools work an example is in order. The ETH/USDT pool, one of the more popular pools on Uniswap, requires LPs to stake an equivalent value of ETH and USDT. For example, a $1000 stake of ETH would warrant $1000 worth of USDT to be staked alongside.

The asset pairs held in the liquidity pool enable users to swap one token to another. A user intending to acquire USDT can deposit ETH to the respective contract on the AMM DEX which will be added to the underlying liquidity pool and receive an equivalent value of USDT from the same pool, minus the transaction and swap fees.

The LPs receive transaction fees for every trade or “swap” proportional to their stake in the entire pool as an incentive for staking their assets. Uniswap LP returns, for instance, are known to offer 0.3% of every swap as a transaction fee to LPs.

On top of that, LPs receive LP tokens for staking in pools which can be further deposited in liquidity farming protocols to earn additional gains. In certain cases, the LP tokens have risen greatly in value themselves leading LPs to accrue insanely high profits from yield farming protocols.

As attractive as the profit-making possibilities with liquidity pools are, there are definite risks involved which if not understood can lead to huge dents in investors’ pockets.

Liquidity Pool Risks

While liquidity pools play a central part in the functioning of DeFi ecosystems, they are flawed in certain ways that could lead to potential losses for individuals providing liquidity. One of the most evident risks associated with staked assets in a liquidity pool is price volatility.

In the current state, users are required to stake crypto assets in pairs, and drastic price fluctuations could expose them to potential loss in value of both staked assets irrespective of whether they like it or not. Such a scenario is better known as involuntary exposure.

Further, the volatility creates heightened exposure to risk with cryptocurrency investments not only while holding them but also through a phenomenon unique to liquidity pools known as impermanent loss.

This kind of loss occurs when the values of the staked assets change – up or down – due to larger market movements. Consequently, arbitrage opportunities occur due to varied token prices between the pool and the larger market leading to trades that change the ratio of the asset pairs in the pool.

The combination of the market movements and change in asset ratios lead to LPs losing out on potential gains if they held onto their assets in their wallets instead. The impermanence of the loss lies in the fact that it can be recovered if the asset prices return to their initial price at the time deposit.

The loss, however, becomes permanent if the LP withdraws their stake from the pool before it is rectified. The fees and rewards accumulated can offset the losses at times, but simply holding the tokens in a wallet can make decent profits, let alone breaking even, leaving LPs dissatisfied.

The impermanent loss phenomenon is quite common with liquidity pools, leading novice LPs to face immediate hurdles while trying to generate profits. Moreover, more seasoned DeFi users refrain from indulging in liquidity provisioning because they see impermanent loss as an issue.

Thus, developers have been working on alternatives that will not only prevent LPs from facing impermanent loss but also allow them to reap decent profits. One such alternative is known as the single sided liquidity pool, helping LPs avoid the shortcomings of regular liquidity pools.

How Do Single Sided Liquidity Pools Work?

The single sided liquidity pool allows LPs to stake a single asset in it, while the other asset in the pair is staked by the protocol and is usually the protocol native token.

Not only do these pools minimize the LPs’ risk exposure to one asset, but they also prevent them from incurring permanent losses if they choose to withdraw the staked asset when it is afflicted by impermanent loss. Therefore, LPs have less to worry about as compared to staking in regular liquidity pools.

There are few single sided liquidity pools in DeFi, on platforms like Bancor, AAVE and Compound. InstaDEX is also one of the platforms that is championing the implementation of single sided liquidity pools for Tezos-based and multichain compatible crypto assets.

The single sided liquidity provisioning allows users on platforms like InstaDEX and others to stake just one asset to the liquidity pool instead of asset-pairs like in conventional AMM DEXs.

In this set-up, the platform pitches in by contributing an equivalent value of the corresponding asset to the pool to balance the value of both supported token-pairs.

By offering single sided liquidity provisioning, InstaDEX offers the flexibility of choosing the asset they wish to stake, based on their existing crypto portfolio and risk appetite.

Anyone holding just one asset can also become an LP and earn returns without having to split their portfolio by swapping the tokens just to fulfill the liquidity provisioning requirements.

Single Sided Liquidity Pools and Impermanent Loss

By participating in single sided liquidity pools, LPs will continue to earn rewards in the form of a percentage of swap fees charged by the DEX, while leaving them free to stake the LP tokens received against their contribution to the pool on any supported liquidity farming contracts.

With the LPs exposure limited to just one asset in the liquidity pool, the scope for impermanent loss is very less to absolute zero.

Users providing single sided liquidity will be able to withdraw equivalent amount of assets from the pool at any time, and the value of the said asset will remain the same as prevailing market conditions, just like it would have been in case they had just held on to it in their own wallets.

Meanwhile, to ensure the overall health of the liquidity pool and minimize potential losses to those with exposure to both assets in the pool some platforms have impermanent loss insurance in place.

The IL insurance is backed by a treasury funded by a small percentage of transaction/exchange fees and depending on the set policies and the condition at the time of withdrawal of liquidity by the LP, the insurance will compensate for any impermanent losses they incur.

Single Sided Liquidity Pools Are Making Liquidity Provision Convenient

Liquidity pools are an important aspect of DeFi without which the activity witnessed on various protocols will dwindle. The issues prevalent with liquidity pools, however, need to be corrected so LPs face lesser risks because of protocol makeup and receive better incentives while staking to provide liquidity.

Single sided liquidity pools avoid impermanent loss and multiple token exposure, offering improvements to DeFi’s conventional liquidity provision methods.

By covering losses and simultaneously incentivizing users for liquidity provisioning, single sided liquidity pools are making aspects of DeFi much safer and predictable for users.

Moreover, this is attracting more liquidity into DeFi ecosystems allowing LPs to make greater sums. As liquidity increases, users across DeFi protocols can swap for needed tokens easily with no worries of slippage and interact with plenty more use cases and applications.

Categories
DeFi tools Research

Impermanent Loss in DeFi- How Liquidity Providers Can Avoid It

Financial instruments exist to help individuals and institutions save, manage, and grow their assets. Yet many investors find themselves unhappy or lacking motivation to indulge in most of the traditional asset classes due to a variety of reasons, some of which includes issues with accessibility, associated costs and regulatory red tapes, large ticket sizes combined with low returns and more. All these factors have led them on a search for attractive alternatives, conveniently offered by DeFi.

Evolving from the technology underlying Bitcoin, followed by the introduction of the first ever programmable blockchain in the form of Ethereum, DeFi is the application of the very technology to create financial solutions. DeFi, short for Decentralized Finance, now provides a viable alternative to highly centralized traditional financial systems.

DEXs in DeFi

Powered by crypto assets, the applications of DeFi range from simple exchange/swap solutions to lending, insurance, and other yield generation instruments. It is open for everyone to participate, enabling them to invest and generate returns without the hurdles faced in traditional finance. In most DeFi instruments, users are always in control of their funds and play a crucial role in ensuring continued operation of these solutions.

Decentralized Exchanges – DEXs, play a pivotal role in the DeFi ecosystem. Its importance is underlined by their presence in native form on each of the many blockchain protocols out there. Apart from allowing users to exchange one crypto asset to another, they also pave the way for various other DeFi activities like staking and yield farming.

Liquidity Provisioning on DEX

For an exchange platform to operate, they need to have liquidity in the form of tokens for each crypto pair they support. Centralized exchanges maintain a huge liquidity pool composed of user deposits along with their own funds that enables uninterrupted exchanges and trades. However, in a decentralized context, there is no centralized pool. Instead, they rely on the community members providing liquidity by depositing their holdings into respective liquidity pools, in exchange for rewards.

Such a model, automated by smart contracts is known as Automated Market Maker model and the DEXs are called AMM DEXs. Few examples of AMM DEXs on different protocols include Uniswap on Ethereum, QuickSwap on Polygon, QuipuSwap and InstaDEX on Tezos and so on.

As Liquidity Providers (LPs), community members stake their crypto assets, usually in pairs, into the liquidity pools present in automated market maker (AMM) DEXs. Other users looking to exchange their assets can select the relevant token pair listed on the platform and deposit one of tokens into the smart contract to receive an equivalent value of another into their wallets to complete the swap process.

The deposited token gets added to the liquidity pool to affect the withdrawal and transfer of the other token from the same pool.

For their contribution to the ecosystem, LPs receive a portion of the transaction fees on swaps charged by the platform from its users as rewards. Sometimes, the LP tokens received by liquidity providers as a confirmation of their contribution to the pool can be deposited in certain DeFi farms to earn additional rewards.

While liquidity provisioning acts as an attractive passive crypto income generating activity, it is also associated with risks that could lead to LPs losing large sums of value, like rug pulls, flash loan attacks and impermanent loss- the latter of which can be avoided or mitigated with the right information.

The saying “the greater the risk, the greater the reward” applies even more for a segment as volatile as cryptocurrency but a smart investor usually works around the risks present to make steady profits in the long run.

What is Impermanent Loss in DeFi?

Impermanent Loss is an unrealized loss that LPs only notice upon withdrawing their asset pairs from liquidity pools. It refers to a reduction in the dollar value of these staked assets as compared to their dollar value if the LPs just held on to them. By deciding to not withdraw their assets and wait it out instead, there’s a chance that the loss could correct itself- hence named ‘impermanent’.

How Impermanent Loss Occurs, With an Example

It would obviously make more sense to explain such a technical concept with an example that will aid in understanding better.

Let us say, a liquidity provider, LP1 decides to provide liquidity to a 50:50 ETH/DAI pool on Uniswap. The person stakes 10 ETH at a price of $1000 per token and an equivalent value of 10,000 DAI to secure a 10% stake in the pool containing a total of 100 ETH and 100,000 DAI.  Following LP1’s contribution, a user decides to swap 50,000 DAI to 50 ETH from the pool. Following the swap, the liquidity pool will have 50 ETH and 150,000 DAI.

Meanwhile, let us assume an increased demand for ETH in the market drives its value by 2x to $2000 per tokens. At this time, if LP1 were to withdraw their staked assets, which is 10% of the pool value at that moment, they will receive 5 ETH and 15,000 DAI valued in total at $25,000.

If the person had held on to the assets without contributing to the pool, it would have been worth $30,000 ($20,000 in ETH and $10,00 in DAI). By contributing and withdrawing from the liquidity pool, LP1 experienced an effective impermanent loss of $5,000.

Those who provide liquidity for highly volatile assets are at a higher risk of losing value due to the occurrence of this phenomenon. However, by keeping in mind a handful of suggestions and playing it smart they can prevent the loss of any value or at least minimize it.

Ways to Avoid Impermanent Loss

Liquidity providers can make use of multiple options provided by DeFi platforms to minimize the magnitude as well as risks of impermanent losses. Some of the tried and tested strategies include participation in yield farming, providing liquidity for stablecoin pairs or low-volatility pairs, opting for flexible pool ratios and single asset liquidity provisioning.

Yield Farming

The best form of defense is offense and LPs can be on the lookout for farming programs offered by the same protocols offering the liquidity pools. By farming the proceeds received from the pools, they can bag considerable yields that are often large enough to offset impermanent losses whose occurrence can sometimes be inevitable. A risky strategy, it is something that seasoned investors should give a try.

Stablecoin Pairs

For those wanting to play it safe, staking stablecoin pairs is the way to go. As the name suggests, the value of stablecoins remains mostly constant albeit for minor fluctuations at times. The absence of volatility with such token pairs makes the chances of dealing with impermanent loss quite low (very slight fluctuations in the value of these coins do occur sometimes).

As the least risky way to provide liquidity, one can expect to earn profits from trading fees depending on the demand for these tokens.

Low Volatility Pairs

The returns on liquidity provisioning for stablecoin pairs may be on the lower end and the next best alternative is participation in pools consisting of low-volatility crypto pairs. At a slightly elevated risk potential, users can stake their assets in such pools being assured of minor price variations between each other. They can choose to invest in those pairs that exhibit similar price fluctuations, in the same direction to evade potential losses.

Flexible Pool Ratios

For those with a greater risk appetite and keen on providing liquidity for assets that are on the more volatile side, liquidity pools that offer flexible ratios balance out the risk. Pools in popular AMM DEXs like Uniswap follow the 50:50 ratio and keep the total value of the pool constant using algorithms. However, such ratios are known to cause impermanent losses frequently.

Instead, pools where one asset has a huge weightage as compared to the other reduces and can prevent such losses. For example, certain DEXs consist of popular pools that allow users to stake token pairs at 80:20, or even 98:2 ratio. re of the ratio 80:20 or even 98:2. Any impermanent loss experienced is minimal and can be easily offset by transaction fees.

Single Sided Liquidity Pools

Pools with flexible ratios like 98:2 prevent users from facing greater exposure to the volatility of two different assets at the same time. A new breed of DEXs led by Bancor – the first protocol to deploy the AMM algorithm providing for single sided liquidity pools, followed closely by InstaDEX on Tezos ecosystem take liquidity provisioning to the next level by allowing LPs to stake and maintain complete exposure to one single asset.

Such protocols also offer protection from the impermanent loss incurred with single asset liquidity provision- a great incentive to provide liquidity to the platform. Therefore, LPs can hold their assets in the pool for long periods of time, generating passive returns in the form of trading fees, staking rewards, and compounding yields.

Investing in Single Sided Liquidity Pools

Liquidity providers can begin to invest in single sided liquidity pools by staking a volatile asset. Meanwhile, as a market maker, the protocol or other users co-invests an equivalent amount of its native tokens and charges fees on its stake until the LP withdraws their asset at which point the co-invested tokens are burnt.

The fee collected is used by the protocol to cover any impermanent loss that LPs face in these pools. Moreover, LPs can also stake these native tokens that they own on the other side of the single asset provision pools. These tokens replace those staked by the protocol which are burnt.

Single Asset Liquidity provisioning pools on InstaDEX– the first platform on the Tezos blockchain to offer Bancor like features allows users to stake any asset of their choice on the relevant liquidity pool for efficient utilisation of the user’s portfolio.

Further, the impermanent loss protection insurance offered by InstaDEX covers LPs from potential impermanent losses after a minimum staking period of 100 days. The insurance fills the difference in value of assets in case of impermanent losses during the time of withdrawal to ensure the LP doesn’t lose any value by contributing to the ecosystem.

Conclusion

Impermanent loss is a by-product of all the advantages offered by DeFi. In the existing conventional AMM structure, it may be unavoidable, but there are always options available for consideration to minimize or overcome it.

With InstaDEX, Instaraise has devised single asset staking and impermanent loss protection insurance as a way to ensure the community is encouraged for their efforts and not penalized by forcing them to accept impermanent loss under volatile market conditions.

Categories
DeFi tools

Introducing InstaDEX- An overview

The leading decentralized fundraising and incubation protocol on Tezos, Instaraise has been preparing itself to launch the much-awaited InstaDEX, marking its successful transition into a full-fledged end-to-end DeFi solutions provider on Tezos protocol.

Operating alongside the existing offerings of Instaraise, InstaDEX is a decentralized exchange that incorporates revolutionary features that are new to the Tezos ecosystem.

The features that make InstaDEX stand apart from its counterparts include

        Single Asset Liquidity Provisioning
–         Impermanent Loss Protection

These features are a step away from legacy AMM DEXs, which have been following the practice of liquidity provisioning in token pairs and absolutely zero protection against impermanent loss for liquidity providers.

By protecting the interests of investors, InstaDEX encourages more users to join the ecosystem as liquidity providers, supplying much-needed liquidity to small and mid-cap assets belonging to latest projects on Tezos.

In return, liquidity providers will be rewarded handsomely for their contributions to the growth of the Tezos ecosystem.

InstaDEX is the perfect stepping stone for innovative projects vetted by Instaraise for fundraising and incubation on the platform.

With InstaDEX, the offerings of Instaraise come full circle, from incubation, fundraising and community building to conclude with listing on a high-quality DEX.

Problems Solved by InstaDEX

Is there a need for one more AMM DEX on Tezos, a question asked quite often, and the answer to which lies in the existing problems that are being addressed by InstaDEX.

The most common issues faced by any participant in DeFi protocols are involuntary token exposure and impermanent loss.

In its current state, all AMM DEXs require liquidity providers to make paired deposits corresponding to the token-pairs supported by the liquidity pool. It forces investors to expose themselves to price movements of multiple tokens in a pool, leading them to lose their long positions on their favorite tokens.

Similarly, due to price movements and the pool composition, liquidity providers are at times faced with a situation where the value of the tokens withdrawn from the pool ends up being less than that of the current value of the actual deposit if held on, without contributing to the protocol.

While the situation tends to correct itself over time, any withdrawal made during that period ends up making those losses to liquidity providers permanent.  Both issues raise apprehension among users regarding participation as liquidity providers in DeFi ecosystems.

Both these prevailing problems are solved by InstaDEX with two features – Single Asset Liquidity Provisioning and Impermanent Loss Insurance.

What’s Single Asset Liquidity Provisioning?

Deviating from the practice established by first generation AMM DEXs, InstaDEX allows users to contribute a single asset to the liquidity pool. By doing so, liquidity providers can overcome involuntary token exposure and continue to earn yields from swap fees charged by the DEX.

Whenever a single asset contribution is made to the liquidity pool, InstaDEX will compensate the pool with an   equivalent deposit of corresponding token. Meanwhile, single asset liquidity providers also get an opportunity to participate in yield farming activities using LP tokens issued against their contribution to the pool.

The Single Asset Liquidity Provisioning on InstaDEX is applicable for both Network tokens ($INSTA) and Base tokens (tokens other than $INSTA). Anyone can create a pool of Network and Base token pairs, provided they supply the initial liquidity at a 1:1 ratio in terms of token value.

Once the pool is established, anyone can contribute base token or network token as liquidity in which case, the protocol will contribute an equivalent value of network token ($INSTA) from reserves. In turn, the LP tokens thus issued will be shared between the protocol and the user, each receiving 50% of the LP tokens.

While users can provide liquidity in network tokens, the number of tokens one can contribute is directly related to the amount of LP tokens held by the protocol following its matching contributions towards base token liquidity provisioning.

During the process, the LP tokens held by the protocol will be issued to the contributor in exchange for replenishing the network token reserves.

Impermanent Loss Insurance

Any user providing liquidity to a DeFi pool does so to earn returns for their contribution towards the DEX operation. However, the impermanent loss experienced at the time of withdrawal from the liquidity pool can be a downer.

At times, the extent of impermanent loss can stretch beyond the total deposited value and share of swap fee accumulated over time, which is a cause of concern for many investors.

The impermanent loss insurance on InstaDEX ensures that every liquidity provider always gets back the same value originally deposited into the liquidity pool at the time of withdrawal.

The IL coverage accrues at the rate of 1% per day, effective after a minimum duration of 30 days. The coverage ranges from 30% to 100%, depending on the number of days the user stays invested in the liquidity pool.

All contributions surpassing 100 days receive 100% coverage against impermanent loss. The IL Insurance coverage is funded by InstaDEX using the yields from co-investment of $INSTA in pools against single asset liquidity provisioning and in an event of shortfall, drawn from $INSTA reserves maintained by the platform.

Getting Technical

Technical Overview of InstaDEX Architecture

Liquidity providers maintain the liquidity pool by contributing supported pairs of base and network tokens. In an event of single asset liquidity provisioning, the protocol reserve will match the base token contribution with network tokens.

With a balance of network and base tokens maintained in the pool, users can swap one supported token with another while paying a swap fee.

A portion of swap fee generated by InstaDEX operations go towards paying rewards to liquidity providers while the remaining goes into the IL protection reserve used to provide IL Protection insurance coverage to liquidity providers.

If the IL protection fund is not enough to cover the losses, the shortfall will be covered by funds from $INSTA reserves to ensure all eligible liquidity provider’s interests are covered.

Single side liquidity provisioning, swap dynamics, impermanent loss, compensation eligibility and amount in an event of impermanent loss are all calculated using mathematical equations.

If you wish to dig deeper and decipher each equation, we suggest you refer to the InstaDEX lightpaper here.

While you are at it, we will continue preparing InstaDEX for its upcoming launch, the date of which will be revealed soon. Until then keep tracking our official announcement channels.

Categories
DeFi tools

A Dex designed to boost and re-shape Tezos Defi – InstaDEX FAQs

Instaraise, the first of its kind decentralized fundraising and incubation protocol on Tezos protocol, has been preparing the ground for a full-fledged DeFi offering on its path to introduce Instaraise v2.0.

Some of the prominent products and features included in the upgrade includes the InstaDEX decentralized exchange platform and a cross-chain bridge connecting Tezos ecosystem with other blockchain protocols.

The future roadmap for Instaraise v2.0 has garnered a lot of community interest. InstaDEX has stood out with prominent features like Impermanent Loss protection insurance and single asset staking.

The combination of a decentralized exchange platform along with existing infrastructure and a strong community following will turn Instaraise into a comprehensive incubation and fundraising platform that can cater to projects in various stages of development while offering all the required support until they gain sufficient adoption.

Meanwhile, the cross-chain bridges, once introduced, will open the Tezos ecosystem to a much larger community, attracting more users and liquidity.

Lots of curious eyes following InstaDEX

Yet to be officially launched, InstaDEX has already attracted a lot of attention, especially the impermanent loss protection and single sided liquidity provisioning parts.

As a result, a lot of queries regarding the benefits of InstaDEX over its peers, and how these new features, introduced for the first time on Tezos will help, continue to float around on internet forums, AMA sessions and even Instaraise’s social media and communication channels.

Questions surrounding AMM DEXs and Impermanent Loss

There are many AMM (Automated market makers) DEXs operating in the crypto industry and they are all plagued by one small issue that affects liquidity providers- Impermanent Loss (IL).

So, what is Impermanent Loss?

Impermanent loss is a reduction in the value of crypto assets in a liquidity pool experienced by the liquidity provider at the time of withdrawal as compared to the present-day valuation of the actual contribution made to the pool.

The fluctuating value of assets combined with demand and available liquidity in the pools play a significant role in causing impermanent loss.

Can impermanent loss be ever completely neutralized?

It is one of the most common questions asked by many. Unfortunately, the answer is no. But one can minimize exposure to such losses by timing the withdrawals right as any losses due to impermanent loss turns permanent only after the withdrawal from liquidity pool is initiated.

How can one avoid Impermanent Loss?

Apart from ensuring the right timing for withdrawal, the next best option to avoid losses is through IL Protection. Impermanent Loss Protection acts as an insurance that gets triggered automatically whenever an eligible user is at the risk of incurring a loss while withdrawing from the liquidity pool.

In case of InstaDEX, the platform will have an IL Protection insurance in place to ensure the liquidity providers on the platform are not affected by the pool conditions that could force them to face losses during withdrawals.

With IL Protection, InstaDEX encourages more users to join the ecosystem as liquidity providers, without worrying about losing money unnecessarily.

The InstaDEX IL protection insurance policy is a result of in-depth research as well as a case study of Bancor, the first DEX to offer such a program.

Didn’t Bancor suspend its IL protection cover recently?

Bancor has temporarily suspended IL Protection due to evolving crypto market conditions which are not favorable at the moment. There is a high possibility the coverage will be reinstated in the future.

Even though the Instaraise team has drawn inspiration from the Bancor model, they have carefully designed the gamification element of the InstaDEX IL insurance in such a way that a repeat of a similar market scenario after launch does not impact the protection offered to liquidity providers.

How does InstaDEX differ from Bancor and other DEXs in terms of IL protection?

Gamification on InstaDEX is designed to be self-feeding and self-securing to attract both traders and LP providers.

An increase in trade results in better treasury building and wider, complete insurance coverage. For e.g., whenever the market fluctuation is high, traders tend to execute more traders on the DEX which in turn contributes towards a healthier treasury capable of offering better insurance coverage to LPs.

IL coverage on InstaDEX begins from Day 30 for LPs with a 30% coverage. The coverage continues to increase each day until Day 100 to reach 100% coverage from that day and beyond.

The self-incentivizing and self-insuring structure in InstaDEX diverts a portion of platform revenues generated from transaction fees in $INSTA to a compensation vault.

The $INSTA holdings in the compensation vault act as the treasury to cater to any IL insurance liabilities incurred during the operation.

The 100% IL protection for LPs active for 100 days or more will be available only on InstaDEX, creating a safer environment for the LPs to participate in the ecosystem.

The extent of coverage on other platforms is limited to a certain extent and doesn’t compensate for the full extent of losses incurred by an LP at any time.

All these factors make InstaDEX stand apart from Bancor and other AMM DEXs that are currently out there in the market.

What is Single-Sided Liquidity provisioning offered by InstaDEX?

Most DEXs allow users to provide liquidity in pairs. The LP must deposit an equivalent value of both tokens comprising the exchange/trading pair supported on the platform.

The Single-Sided Liquidity provisioning championed by InstaDEX allows LPs to provide liquidity in any supported token of their choice instead of token pairs specific to each liquidity pool and continue to earn rewards.

Each such contribution will be countered with an equivalent of the corresponding token in the liquidity pool by InstaDEX from the protocol reserves.

For e.g., in an $XYZ-$INSTA liquidity pool, the LP can choose to provide liquidity either in terms of $XYZ or $INSTA without having to worry about securing and depositing an equivalent value in other token, which allows them to go bullish on a single token while generating fees from them.

InstaDEX to become the driving force behind $INSTA and the entire Tezos ecosystem

Like all blockchain ecosystems, Tezos protocol is also a home for multiple AMM DEXs. With so many AMM DEXs, some with cross-chain compatibility available in the crypto industry, the crypto community is interested to know about the benefits InstaDEX as a new entrant will offer over its peers.

There are few obvious questions regarding InstaDEX in the Instaraise and Tezos context that need to be addressed as well.

How does InstaDEX differ from other AMM DEXs? How does Tezos ecosystem benefit from it?

InstaDEX is not just another AMM DEX on the Tezos protocol. In fact, it is part of a much larger ecosystem driving value to Tezos by providing a secure and lucrative avenue for crypto investors to contribute towards the growth of DeFi on Tezos.

With IL protection, single-sided liquidity and cross-chain compatibility, investors can be assured of their interests being protected on a much larger, flexible playground.

Meanwhile, projects that are part of Instaraise incubation and fundraising platform get ready access to a trusted AMM DEX with high liquidity and a diverse investor base that could potentially differentiate between success and failure. All these factors contribute towards increased adoption of Tezos.

What Impact will InstaDEX have on Instaraise’s $INSTA utility tokens?

Meanwhile, $INSTA as the base token for swaps on InstaDEX and an ecosystem token of Instaraise has a strong utility which translates to a strong valuation.

With more people providing liquidity to InstaDEX pools in $INSTA, the demand for Instaraise’s native token will soon outstrip the supply.

The increase in importance of $INSTA on Tezos is only augmented further by increased arbitrage opportunities across multiple DEXs, all painting a promising picture for $INSTA holders and members of Instaraise and Tezos communities alike.

Wait coming to an end soon…

It is just a matter of time before InstaDEX is officially launched. Amid turbulent market conditions, the platform is being constantly battle-tested to ensure there are no surprises in any scenario.

Once the team is assured of the robustness, security and versatility of the platform, and the market stabilizes a bit, InstaDEX will be made available to the public.

Categories
Dev updates

InstaDex Private Testnet V1 “Skywalker”- Participate Now!

Instaraise team is thrilled to inform the whole Tezos community that the ”Skywalker” (InstaDex version 1.0) is now live on Testnet. This update signifies our hard work and the commitment towards our mission of building a Defi universe on Tezos.

InstaDex is going to be the first “Single asset liquidity provisioning” DEX on Tezos.

With InstaDex, we aim to solve the problem of Involuntary Token Exposure and Impermanent Loss by creating a system where INSTA holders i.e the liquidity providers will not only manage the risk, but also participate in the upside via swap fees collected by the protocol.

By diversifying the risk of impermanent loss across a wide array of pools, we could potentially deploy a system where the revenue from swap fees exceeds the network-wide cost of Impermanent loss insurance.

Skywalker Beta tester program

Tezos has always been an ecosystem of a highly talented crowd of developers, artists and crypto lovers who collectively work towards the upliftment of the whole ecosystem.

As InstaDex is built for the community, what’s better than every member contributing towards building the First DEX on tezos with impermanent loss protection?

Therefore, we introduce you to Skywalker Beta tester program with an aim to build together on Tezos

To apply for the program, signup by filling a small form given below
➡️ https://bit.ly/SkywalkerBetaTesterApplication

We hereby call upon all developers to help join our team to further develop the InstaDex which will ensure that we develop a product that the community truly loves. The tez army in the Beta tester program will be working closely with the Instaraise team to test the Skywalker version of InstaDex and be instrumental for the success of the same.

What’s in it for the Beta testers?

The Beta testers in the Skywalker Beta testing program will be entitled to various perks and opportunities that will be coming soon during our Public testnet release and Mainnet launch. Few of them will include

  • Work with highly skilled developers and test the private ‘Skywalker” version of InstaDex before anyone else
  • A reward pool of $2,000 worth XTZ token will be airdropped to our top 5 Beta testers on the mainnet launch (Read section “Rewards distribution” to know more)
  • A chance to be seen by the wide Tezos and crypto community for sharing your views and opinions on our DEX which will also help you in ensuring brand value and exposure to many bigwigs in the industry.
  • Beta testers can also become the early liquidity provider on InstaDex and earn Tx fees
  • Exclusive access to upcoming Instaraise events

Your role as a Beta tester

The Beta testers will be the first one to get exclusive access to InstaDex private testnet “Skywalker” and will be able to play around with the testnet before anyone else.

As a tester, you will be required to test Skywalker and hunt down any bugs or security concerns that might be critical for the development of the DEX

Apart from this, you are welcomed to provide your valuable suggestions and ideas that can further improve DEX functionalities.

How to apply for the program?

Fill out the small form below to apply for the Skywalker Beta testing program.

➡️ https://bit.ly/SkywalkerBetaTesterApplication

Submitting your feedbacks

Submitting the feedbacks, bugs and suggestions is as easy as posting a tweet!

While testing the ins and outs of the Skywalker, you can provide feedback and suggestions by simply sharing them via individual tweets or a tweet thread on Twitter with proper screenshots/videos supporting your feedbacks.

If, anyhow you are unable to find any bugs, you can even share your review about the Skywalker via tweet which will be equally significant.

Make sure that you tag “@instaraise” in your tweet along with the hashtag “#InstaDex” for us to find your tweet easily.

TIP- The more elaborated and well explained is your tweet, the higher is your chance of winning!

For any other queries related to the program, contact us directly on the Instaraise official telegram community channel where our admins are always ready to help you.

Reward distribution

This Beta tester program will consist of 20 individual Beta testers who will testing the ins and outs of the Skywalker. However! to spice things up, only 5 winners will be selected out of those who will share $2,000 worth of reward pool of XTZ equally.

Winners will be selected on the basis of

  • The criticality of the bugs and issues found out during your testing
  • Significance of your suggestions for the development of the DEX
  • The level of deep testing done by the testers which will be interpreted by the quality of your feedback and suggestion tweets

Result Announcement

The results announcement and airdrop for the private beta tester program winner will be done soon at the time of InstaDex mainnet launch!

Join our Instaraise community channel for instant updates about the program and upcoming developments➡️  https://t.me/Instaraise