(RFP Idea): Automated Liquidity Optimization (ALO) on UniswapV3 via DefiEdge

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Abstract

As an omnichain money market protocol, Radiant (RDNT) aims to efficiently deploy liquidity across all chains. With UniswapV3 now available on the Binance Smart Chain (BSC), Radiant Capital can utilize protocol-owned liquidity on UniswapV3 to enable low-slippage trading and capitalize on enhanced capital efficiency on BSC.

Motivation

Deploy treasury liquidity on UniswapV3 to increase fee capture and facilitate low-slippage trading on BSC.

Rationale

UniswapV3 introduces an innovative liquidity provisioning method that improves capital efficiency and price discovery. Liquidity providers (LPs) can now concentrate their liquidity within specific price ranges, earning amplified fees rather than distributing liquidity across the entire price range of the pool.

DefiEdge, a non-custodial, decentralized liquidity management layer on top of UniswapV3, ensures secure and permissionless operations. Top security experts in the ecosystem have thoroughly vetted DefiEdge’s smart contracts [Security | DefiEdge]. DefiEdge recently completed a successful liquidity mining campaign with UniswapV3 on Optimism, distributing 25,000 OP tokens across four pools using its custom liquidity management and mining contracts. The platform already supports over $7.5M of liquidity deployed on UniswapV3 on the Ethereum Mainnet and layer 2 chains such as Polygon, Optimism, and Arbitrum. With the recent launch on BNB Smart Chain.

Currently, the largest volume of RDNT trading on a DEX is on Pancakeswap, where swaps experience higher slippage and LPs accrue lower fees compared to UniswapV3. The lack of ability to express even conservative price outlooks results in arbitrage opportunities. A substantial portion of Pancakeswap trades involves arbitrage across centralized exchanges (Binance) and DEXs (on ARB and BSC) since Pancakeswap holds the majority of liquidity on BSC. The UniswapV2 AMM model lacks capital efficiency, but by deploying liquidity on the UniswapV3 RDNT/BNB pool, BSC traders will benefit from reduced slippage and the protocol will earn higher fees. DefiEdge has a proven track record of managing liquidity across various token pairs and chains.

DefiEdge has successfully managed liquidity across various token pairs across many chains.

Some examples:

1/ OP/wETH on Optimism

[https://app.defiedge.io/s/optimism/0xa5c2490a10a41fa1262999d848fa3391523ccee9]

2/ UNI/wETH on Arbitrum

[https://app.defiedge.io/s/arbitrum/0xca7fbbeec68791a0049e63e634baaff7fab0f4a5]

Specifications

DefiEdge proposes managing $500,000 worth of liquidity in an RDNT/wBNB 0.3% pool on UniswapV3. To avoid dependencies or centralization risks, we recommend pairing treasury liquidity with each chain’s native token. DefiEdge’s contracts enable liquidity deployment across multiple (up to 20) ranges, and we plan to allocate the liquidity in three distinct tiers:

1. 50% of liquidity placed between 0.1x to 10x of the spot price
2. 30% of liquidity placed between 0.25x to 4x of the spot price
3. 20% of liquidity placed between 0.5x to 2x of the spot price
Liquidity can be rebalanced monthly or according to predetermined price triggers. The base liquidity (50%) ensures a counterparty is available when concentrated ranges need rebalancing.

Security

DefiEdge places a high emphasis on security and has taken comprehensive measures to ensure the safety and integrity of its protocol. The team has been diligently building the product for two years, with a focus on robustness and resilience. They have implemented stringent security protocols and best practices to protect user funds and data from potential threats.

In addition to the team’s internal security measures, DefiEdge has undergone multiple audits by reputable third-party security firms. These audits thoroughly assess the protocol’s codebase, smart contracts, and overall security architecture. The audits provide an additional layer of assurance to users and the community, ensuring that DefiEdge has undergone rigorous scrutiny and is committed to maintaining the highest security standards.

DefiEdge also maintains a proactive approach to security, regularly monitoring the protocol for any potential vulnerabilities and addressing them promptly. The team actively engages with the community and welcomes feedback and bug reports from users to ensure continuous improvement and strengthen the security of the platform. DefiEdge’s dedication to security and its commitment to regular audits demonstrate its strong focus on protecting user assets and maintaining a secure environment for its users.

Audits Link:

Audits

USP:

DefiEdge offers several advantages over its competitors, making it a leading choice for asset management on concentrated liquidity DEXes:

  1. Permissionless Protocol: DefiEdge is a permissionless protocol, which means anyone can participate without requiring approval or permission. This allows for greater accessibility and inclusivity, enabling users from all backgrounds to utilize the platform without any barriers.
  2. Customizable Strategies: DefiEdge allows users to create strategies with up to 20 different price ranges, providing flexibility and customization for optimizing liquidity provision. This allows for fine-tuning of strategies to meet specific market conditions and risk preferences, enhancing the effectiveness of liquidity management.
  3. Gas Fees Optimization: DefiEdge has implemented gas fees optimization measures to reduce transaction costs and improve cost efficiency for users. This ensures that users can effectively manage their assets without incurring excessive gas fees, making it cost-effective for liquidity provision.
  4. Wallet Whitelisting: DefiEdge allows users to whitelist their wallets, providing an additional layer of security by only allowing deposits from approved addresses. This enhances the security and access to user funds in a strategy.
  5. Sub-Manager Functionality: DefiEdge offers a unique sub-manager feature that allows users to delegate the management of strategies to trusted managers. This enables users to leverage the expertise of professional managers to optimize their liquidity provision, while still maintaining control over their assets.
  6. Flagship Automated Liquidity Optimization (ALO) Solution: DefiEdge’s flagship Automated Liquidity Optimization (ALO) solution provides advanced tools and features for managing liquidity on concentrated liquidity DEXes. This includes comprehensive strategies, automated rebalancing, and dynamic price range management, among others, making it a powerful tool for optimizing liquidity provision.
  7. Built-in LM Rewards Contracts: DefiEdge offers built-in Liquidity Mining (LM) rewards contracts, allowing users to earn additional rewards for providing liquidity to the platform. This incentivizes users to participate in the ecosystem and contributes to the growth and sustainability of the protocol.

Overall Cost

DefiEdge will charge a minimal 0.5% management fee and a 10% performance fee based on the swap fee generated from the pool.

Timeline

The integration with DefiEdge works out of the box, as the Liquidity Management Mechanisms and Fees mechanisms (Management Fees & Performance Fees) are native to the DefiEdge platform.

Relevant Links

  1. Website: [https://www.defiedge.io/]
  2. App: [https://app.defiedge.io/]
  3. Docs: [https://docs.defiedge.io/]
  4. Twitter: [https://twitter.com/DefiEdge]
  5. Discord: [DefiEdge]
  6. Medium: [Medium]
  7. Audits: [Audits | DefiEdge]
  8. Youtube Demo’s: [DefiEdge - YouTube]
2

Maybe it’s a good choice. The v3 LP on pancakeswap can’t earn attractive fees.

1 Like
4

Why do you say that?
Isn’t it the exact same protocol?

2 Likes
5

With the difference that PancakeV3 actually has a lot more volume on BSC then UniV3

1 Like
6

TBH just looked at DefiEdge for the first time after I read the proposal. Seems like a solid UI and I can’t argue with the permissionless, decentralized approach. Like we saw with protocol owned liquidity becoming an important part of Radiant’s strategy, it does make sense that having the ability to deploy liquidity in specific ranges or tiers would be desirable. Is this just the next step in the development of Automated Market Maker smart contracts? I’m reading the Medium article and the white paper and will have more thoughts on this later. Interested to see what the community thinks.

7

I couldn’t help but notice a few important points that the author seemed to deliberately omit.

First of all, the author failed to mention that Uniswap is not widely used by anyone on BSC. Therefore, the arguments made regarding fees and arbitrage opportunities on UniswapV3 versus Pancakeswap are absurd and nonsensical.

Furthermore, the author neglected to mention that Pancakeswap has its own V3 solution. It is not fair to compare the two platforms without taking this into consideration.

What really irks me, however, is the fact that DefiEdge seems to be shoving its solutions down our throats instead of developing a product for Pancakeswap V3. This is disrespectful to our community and shows a lack of understanding of our needs.

I regret that such a cheesy proposal has made its way to the Discord announcement channel of the Radiant Protocol. Let’s focus on real solutions that benefit our community, rather than trying to force something that may not be the best fit.

Sincerely,

2 Likes
8

I agree with @technarik.
The current proposal neglects the existence of PancakeV3, which seems like the superior place to seed liquidity on BSC. In addition their claims such as “the protocol will earn higher fees” lacks any supportive data.

This does however bring up an interesting discussion regarding how radiant capital might want to provide liquidity in a PancakeV3 style pool:
Self managed, passively, managed by a 3rd party, etc …

1 Like
9

We can wait for the release of Trader Joe’s automatic liquidity management. I think Pancake v3 is also a good choice that has its own features.

10

Agreed.
I think all RFP proposals should be discussed on discord and either moved forward to a vote or killed. We seem to have a bunch of new ideas crop up that “skip the queue”.

I believe in a fair process for all ideas.

11

I also +1 for the trader joe pool as it has the best revenue sharing for fees.