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DeFi tools Events Research

Project Insight: Lyzi (Launching on Tezos)

As cryptocurrencies gain traction, the demand for innovative payment solutions grows.

Enter Lyzi, a crypto payment platform built on the Tezos blockchain, with its Initial DEX Offering (IDO) set for 05/05/2023 on Instaraise.

Lyzi’s vision revolves around a utility token, $Lyzi, engaging users with financial services, loyalty programs, and an inclusive lifestyle app.

Initially on Tezos, Lyzi plans multi-chain bridges with Ethereum, BNB Chain, and more.

Keep reading for an in-depth look at Lyzi ecosystem and their fundamentals.

Lyzi Application:

Lyzi is a crypto lifestyle app that allows users to make crypto payments, trade digital assets, and enjoy exclusive loyalty and cashback features for online and offline merchants.

Born from the merger of Fidly and Easy wallet, Lyzi is integrated with the Easy2Play network, enabling brands to accept crypto-payments directly via merchant point-of-sale systems.

Initially targeting the European market, Lyzi has global ambitions, with well-known retailers and brands like Lugh consortium, Arthurimmo.com, and Beaugrenelle Mall center already on board.

Lyzi Products:

Lyzi’s comprehensive suite offers a range of products for both end-users and merchants, creating a unique ecosystem to store digital assets, accept crypto payments, and enhance user experiences around Web3 services.

  1. Lyzi Pay: Users can spend crypto with low transaction fees, high security, and 1-5% cashback in $Lyzi tokens. Merchants can accept crypto payments and receive daily fiat settlements.
  2. Lyzi Loyalty: This next-generation loyalty program allows brands to create a dedicated token for their ecosystem, improving customer satisfaction and reducing management costs through blockchain-based interoperability and exchanges.
  3. Lyzi Display: Merchants can promote their stores and special offers directly within the Lyzi app, increasing visibility and customer engagement.
  4. Lyzi Earn: Users can participate in a global dynamic staking program with $Lyzi tokens, earning rewards by delegating tokens to Lyzi’s pools.
  5. Lyzi Trading: Trade cryptocurrencies within the app, with quick and easy access to purchasing and spending options through Lyzi’s merchant map.
  6. Lyzi Incentive Program: This referral program rewards users and merchants for promoting Lyzi’s services. Users can earn powerful bonuses in $Lyzi tokens for referrals, while merchants receive bonuses via credit vouchers or $Lyzi tokens. Recurring commissions are also available on affiliate trading fees.

Lyzi’s diverse range of products, combined with its strong referral program, aims to drive organic growth and adoption, establishing Lyzi as a leader in the crypto payment and loyalty space.

Lyzi Roadmap:

Lyzi has an impressive roadmap packed with upgrades and product releases.

Lyzi’s roadmap is ultimately aimed to enhance the user experience and expanding its reach in the crypto payment and loyalty market.

$LYZI Token Use cases

$Lyzi, the native token of the Lyzi ecosystem, has various use cases, each designed to enhance user experiences and incentivize participation in the platform.

  1. Cashback and Referral Commissions: Users receive $Lyzi tokens as cashback on crypto payments, incentivizing them to increase their visit frequency to the Lyzi merchant network. The token also serves as a reward for successful referrals in both user and merchant affiliate programs.
  2. Staking: Token holders can stake their $Lyzi tokens to earn extra rewards, helping maintain low selling pressure and encouraging long-term holding.
  3. Payment: Users can enjoy reduced transaction fees and exclusive cashback when making purchases with $Lyzi tokens. The platform supports various cryptocurrencies, including XTZ, BTC, ETH, and USDT, with plans to integrate more in the future.
  4. Loyalty: $Lyzi tokens serve as collateral for brand-specific loyalty tokens. Users can swap their loyalty tokens for $Lyzi tokens, while brands can hold $Lyzi tokens to reduce fees associated with running their loyalty programs.

Conclusion

Lyzi is set to revolutionize the crypto payment and loyalty market with its innovative ecosystem built on the Tezos blockchain. 

Lyzi aims to unlock new value in the digital economy by offering users and merchants a seamless, feature-rich platform.

The upcoming IDO on Instaraise launchpad presents an opportunity for investors to be part of Lyzi’s future growth.

Don’t miss out on the chance to participate in the Lyzi IDO. Whitelist for the IDO in just two easy steps➡️https://blog.instaraise.io/lyzi-ido-whitelisting-details-how-to-participate-in-the-lyzi-public-sale/

Stay connected with Instaraise and Lyzi on their social media channels:

Join Instaraise Community channel:➡️ https://t.me/Instaraise

Follow Instaraise on Twitter:➡️ https://twitter.com/Instaraise

Connect with Lyzi:

Twitter: https://twitter.com/Lyzi_app

Discord: https://discord.gg/lyzi-app

Website: https://lyzi.fr/

Telegram: https://t.me/Lyzi_us

For a deeper understanding of Lyzi’s ecosystem, explore the whitepaper: https://lyzi.fr/wp-content/uploads/2023/01/Lyzi-Whitepaper-EN.pdf

Get to know the team behind Lyzi: https://blog.instaraise.io/meet-the-team-behind-lyzi-core-team-advisors-and-business-partners/!

 

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Ecosystem Updates

Welcome to This Week on Tezos: Your Weekly Update on the Tezos Ecosystem

Every week, we bring you the latest news, updates, and developments from the Tezos ecosystem in a concise and easy-to-read format.

“This Week on Tezos” helps investors, token holders, and enthusiasts to stay up-to-date on the developments and updates on Tezos ecosystem. From protocol upgrades to partnerships and everything in between, we’ve got you covered.

In this week’s edition, we’ll be taking a closer look at the following stories:

  1. XTZ price analysis, highlighting the long-term bullish signs and the short-term reversal yet to be confirmed.
  2. The recent Mumbai upgrade, which brings significant improvements to the Tezos blockchain, including smart rollups and increased transactions per second.
  3. Artsale: An Initial NFT offering platform coming on Tezos
  4. King’s College London Blockchain Society’s committee elections, which were held using an e-voting solution based on Tezos blockchain technology.
  5. The Tezos All Star Circuit of Champions, which is set to commence championship points competition at the Core & Main Spring Nationals at Attica Raceway Park.
  6. Turtle Vision, an NFT project that leverages Tezos blockchain to raise awareness and funds for ocean conservation efforts.

XTZ Price Shows Bullish Signs in Long-term, Short-term Reversal Yet to Be Confirmed

Tezos (XTZ), the native token of the Tezos blockchain, has been exhibiting bullish signs in long-term time frames, but its short-term reversal remains unconfirmed. XTZ had been under a descending resistance line since September 2021, hitting a low of $0.70 in December 2022.

In February 2023, the XTZ price broke out from the line but was rejected by the $1.30 resistance area, signaling potential selling pressure.

The long-term price outlook for XTZ appears positive. If the price breaks out of the resistance, it could rise to the next long-term resistance at $2.90. However, another rejection might cause the price to drop back to the $0.70 lows.

In the short term, the technical analysis is less clear. On the bullish side, XTZ has bounced off a possible ascending support line and reclaimed the 0.618 Fibonacci retracement support level. The token price has broken out from a short-term descending resistance line, but the six-hour RSI remains undecided, and the price has yet to begin a significant rally.

The short-term trend could be considered bullish if XTZ does not close below the ascending support line, making an increase towards $1.38 the most likely scenario. However, a close below the support line might invalidate this possibility and could trigger a drop to $0.70.

 Mumbai Upgrade Activated, Bringing Enhanced Scalability and Smart Rollups

The 13th Tezos protocol improvement proposal, Mumbai, was activated at block number 3,268,609 on March 29, 2023.

The upgrade was introduced by seven Tezos teams from four different countries and implemented seamlessly, with only minor block delays for approximately five minutes.

Mumbai brings significant enhancements to the Tezos blockchain, including:

  1. Halving block times to 15 seconds, enabled by pipelining, which further separates validation from the application of operations and blocks.
  2. Launching smart rollups on the mainnet, providing a layer 2 permissionless scaling mechanism and allowing individuals to create and manage multiple rollups to boost processing capacity.
  3. Introducing zk-rollups (referred to as ‘validity rollups’ on Tezos) on the testnet, offering instant finality and privacy upgrades.
  4. Increasing the potential for one million transactions per second (TPS), scaling as needed.
  5. Enabling direct exchange of tickets between user accounts.

Tezos’ smart rollups, known as ‘Enshrined Rollups,’ are implemented as part of the Tezos protocol directly, offering a more gas- and storage-efficient solution compared to smart contracts.

They also provide enhanced security and decentralization, as the network itself owns the rollup.

With the Mumbai upgrade, Tezos continues to push the boundaries of blockchain technology, offering innovative solutions to its community of investors, token holders, and enthusiasts.

Artsale INO platform: Arriving soon on Tezos

Instaraise recently announced the upcoming launch of its INO (Initial NFT Offering) platform, Artsale, which aims to empower NFT creators and enthusiasts with crowdfunding facility on the Tezos blockchain.

Artsale, Initial NFT offering (INO) platform on Tezos

The platform offers a comprehensive solution for artists to run pre-sales, mint, and explore diverse NFT collections.

An INO is a crowdfunding model inspired by Initial Coin Offerings (ICOs) that addresses challenges artists face in selling NFTs, such as immediate liquidity. It offers genesis NFTs, benefiting retail investors and early adopters with lower listing costs and early access to desired NFTs.

Artsale is a user-friendly, self-hosted NFT pre-sale platform that enables customization of NFTs, setting prices, defining sale start and end times, and establishing minting limits.

The main section of the Artsale website will allow users to explore and mint NFTs, participate in pre-sales, search for specific NFTs, and filter them based on various parameters.

The platform is set to launch soon in upcoming weeks.

King’s College London Blockchain Society Utilizes Tezos for Committee Elections

In a recent display of Tezos blockchain’s versatility, King’s College London Blockchain Society successfully conducted their committee elections using a decentralized e-voting solution based on Tezos technology. 

The Director of Consulting at KCL Blockchain highlighted the importance of a smooth, safe, and open voting experience, which led to the adoption of Electis and the Tezos blockchain as the foundation for the e-voting solution. Candidates and voters were registered through their respective Tezos wallets, further demonstrating the efficiency and security of the Tezos ecosystem.

The election process culminated in the automatic transfer of a Non-Fungible Token (NFT) to the winner’s wallet via a smart contract, showcasing the seamless integration of Tezos blockchain technology in real-world applications.

The KCL Blockchain Society’s four categories – Legal, Consulting, Technology, and Operations – all recently held their chair elections using this decentralized voting system.

This innovative use of Tezos blockchain for committee elections not only exemplifies the adaptability of the technology but also highlights its potential for revolutionizing voting processes and internal management across various organizations.

As Tezos continues to make strides in real-world applications, investors, token holders, and enthusiasts can expect a bright future for the Tezos ecosystem.

Tezos All Star Circuit of Champions Kicks Off at Attica Raceway Park

The Tezos All Star Circuit of Champions, presented by Mobil 1, is gearing up for an exciting season of championship points competition, beginning with the two-day Core & Main Spring Nationals at Attica Raceway Park in Attica, Ohio, on April 7-8. 

This event not only inaugurates Attica’s 2023 racing schedule but also offers a generous prize pool, with each of the weekend races awarding $6,000 to the winner and a guaranteed $550 to each A-Main starter.

The Attica Raceway Park, known as the home of “Ohio’s Finest Racing,” will host the Tezos All Star Circuit of Champions on three more occasions throughout 2023. 

These include a single night during Ohio Sprint Speedweek on June 9, and the Attica Ambush, a thrilling Labor Day weekend double, offering prizes of $6,000 and $12,000, respectively.

Tezos ecosystem continues to expand, its involvement in high-profile events like the Tezos All Star Circuit of Champions showcases the growing influence of the blockchain platform in various industries and communities, offering valuable exposure to investors, token holders, and enthusiasts.

Turtle Vision – A Unique NFT Project to Raise Awareness and Funds for Ocean Conservation

Turtle Vision, a novel NFT project, utilizes the Tezos blockchain to create generative art highlighting the devastating impact of plastic pollution on marine life and raise funds for ocean conservation initiatives.

Digital artist Eziraros, known for their talent in the NFT space, collaborated with American ocean conservation activist Casson Trenor to develop the collection.

The art series features jellyfish intermingled with ocean litter, primarily plastic bags, depicting the harsh reality faced by sea turtles in today’s oceans.

Various elements such as color, species, clarity, ratio, motion pattern, and framing are combined to create a captivating and dynamic undersea experience.

Sea turtles, mistaking plastic bags for jellyfish, are increasingly found starved to death with stomachs full of plastic.

Turtle Vision aims to combat this crisis by supporting The 5 Gyres Institute, a nonprofit organization fighting against plastic pollution.

Eziraros and Trenor chose the Tezos blockchain for the project due to its low carbon impact and sustainability-conscious community.

Tezos’ proof-of-stake consensus mechanism consumes significantly less energy than proof-of-work chains like Bitcoin, making it an ideal choice for an environmentally-focused project.

Wrapping Up This Week on Tezos

As we conclude another exciting week in the Tezos ecosystem, it’s clear that innovation, collaboration, and progress continue to drive this thriving blockchain. 

Thank you for joining us for another edition of This Week on Tezos. We hope you found these updates informative and engaging. Remember to check back next week for more news and developments from the Tezos ecosystem. As always, we encourage you to stay informed, stay active, and continue to explore the limitless potential of the Tezos blockchain. Until next time!

 

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DeFi tools Ecosystem Updates

This week on Tezos: News & updates from the Tezos Ecosystem (25/02/2023)

Welcome to “This week on Tezos” where we aggregate all the latest news and updates around the Tezos ecosystem and present it to you every week. Get all the information about the ecosystem at one place.

This week, we have several exciting developments and news items to share with the Tezos community

XTZ price update

Tezos (XTZ) has been making moves in the crypto market lately, standing out with its positive price gains while many other assets have remained stable. Over the last seven days, XTZ has seen an impressive 16.54% rally, surpassing major assets like Bitcoin, Ethereum, and Ripple. In fact, XTZ has been one of the top performers in the crypto space this year, with an overall gain of over 83% since the beginning of 2023.

While there are several factors driving XTZ’s price growth, one significant factor in recent days is the partnership between Tezos Foundation and cloud computing giant Google Cloud, which was announced on February 23.

Tezos <> Google Cloud partnership

Google Cloud will serve as a network validator on the Tezos blockchain as a result of a collaboration between Tezos and Google Cloud. With the news, users of the cloud computing company will be able to install Tezos nodes and create Web3 apps on the blockchain. This marks a major milestone for the Tezos blockchain.

By utilizing the Tezos blockchain and Google Cloud infrastructure, the collaboration will enable businesses and developers to host and implement Remote Procedure Call (RPC) nodes for Web3 apps.

Both new and current users of Google Cloud will have access to the organization’s workplace baking program thanks to the Tezos Foundation. Through the initiative, Tezos will make the deployment of nodes and indexers on the Tezos protocol simple for Google Cloud users interested in developing Web3 apps.

The partnership is also set to provide select Tezos incubator startups with Google Cloud credits and mentorship via the Google for Startups Cloud Program. This is a significant step toward achieving institutional adoption and mass-market opportunities for Web3 technology.

The collaboration comes after Google Cloud set up a special team for digital assets in January 2022 with the intention of promoting the development and expansion of the blockchain ecosystem. The team’s main goal was to help Google Cloud customers create, exchange, maintain, and introduce new products on blockchain-based networks.

Rarible supports NFTs from Tezos marketplaces

On Thursday, Rarible, a well-known non-fungible token (NFT) marketplace, announced that Tezos NFTs would now be supported on its aggregated marketplace. The action comes after Rarible recently declared that it would start aggregating listing from Polygon. Rarible’s aggregation utility will enable its users to buy Tezos-based NFTs from exchanges like Objkt, fxhash, Teia, and Versum.

According to Rarible co-founder Alexander Salnikov, the company decided to incorporate Tezos markets into its aggregation tool in an effort to attract fans who value sustainability as well as crypto-native artists. According to Salnikov, “Tezos is very popular among artist communities, among the exact community that Rarible started with” 

“Tezos landed with the most crypto-native culture … it’s a carbon-neutral chain, it is decentralized, it is more or less one of the chains that achieved scalability and lower transaction costs without compromising decentralization” said the company in a press release.

The Tezos community embraced the announcement as it gave them easier access to a wider audience in Rarible’s network. When it comes to creator rewards, Rarible and Tezos value creators equally. In a press release, the company said that Rarible and all other Tezos marketplaces respect creator royalties.

That’s it for this week! We will be back next week with fresh news and updates around Tezos ecosystem, in our next edition of “This week on Tezos”

Categories
DeFi tools Ecosystem Updates Education

This week on Tezos: News & updates from the Tezos Ecosystem (16/02/2023)

Tezos (XTZ) has been making some exciting moves in the cryptocurrency world lately. One of the reasons for this is its growing partnerships with governments and private institutions around the globe. These partnerships are helping to increase the adoption and usage of Tezos in various industries and regions.

Consistent partnerships

The California motor department recently partnered with Tezos to create blockchain-powered digital wallets for record-keeping purposes. This is a significant development that could lead to greater efficiency and transparency in the department’s operations.

Meanwhile, Tezos India has been working with incubation centers to promote the development of decentralized applications in the country, which could have far-reaching effects on the Indian tech industry.

Coupled with the Mumbai upgrade and other partnerships, these positive developments are making a positive impact on the price of Tezos and it has been on the rise since the beginning of this year.

The Tezos foundation has also agreed to support the earthquake relief initiative by facilitating donation transfers to the NGOs.

Tezos All star circuit has found its champion

Tyler Courtney, also known as “Sunshine,” won the main event for the Tezos All-Star Circuit of Champions for the second night in a row at East Bay Raceway Park in Tampa, Florida. He held off challenges from Justin Peck of Buch Motorsports and led the race from start to finish.

The win earned him $6,000 and brought his total series win count to 18. This victory was part of the Jean Lynch Classic | Classic Ink USA Southern Swing presented by Elliott’s Custom Trailers and Carts.

The championship will continue with Attica Raceway Park’s Core & Main Spring Nationals on April 7-8. This weekend’s events will activate the 2023 All-Star points chase, which means that drivers will compete for points toward the season championship.

Zicron becomes the 27th corporate baker in the Tezos ecosystem

ZirconTech has been helping businesses to adopt digital technologies through customized web and mobile software solutions.

Recently, ZirconTech became the 27th corporate baker in the Tezos ecosystem. A corporate baker sets up a node in the Tezos blockchain, which enables them to play an active role in the democratic Tezos protocol and have a voice in the direction of core protocol development via amendment upgrades.

ZirconTech has developed a blockchain application to enable universities to digitize diplomas and transcripts. The application uses blockchain technology to prove the authenticity of a file. ZirconTech has also integrated Tezos into its general-purpose tokenization platform, Tokenizer, which is set to launch this year.

By becoming a corporate baker, ZirconTech reinforces the trust and involvement that corporations have in the Tezos blockchain. Setting up a node enables them to have a stake in the blockchain when they are running programs and applications on.

That’s it for this week! Not much happened in the last 7 days but we will be back next week with fresh news and updates about the Tezos ecosystem.

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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.

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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.