2021-12-14 22:16

ICHI, the world’s first Decentralized Monetary Authority (DMA) protocol, launched Angel Liquidity Vaults to enable liquidity providers (LPs) to participate in Uniswap V3 liquidity pools without having to actively manage their liquidity positions.

The new DeFi 2.0 protocol builds on Uniswap V3, which introduced concentrated liquidity enabling any LP to allocate assets to a liquidity pool within a custom price range.

Invezz talks to Bryan Gross, Steward at ICHI.

Uniswap only supports assets that are hosted on the Ethereum blockchain, which is seen as a downside. Do you agree?

There’s been significant discussion as to when Uniswap may implement a cross chain strategy and there’s obviously a lot of appetite for that from the crypto community. Uniswap has launched on Arbitrum and Optimism as well. With ICHI, we similarly have a cross-chain strategy and expect to launch on Flow, Solana, Polkadot and other blockchains in the coming months.

Uniswap is the leading Decentralized Exchange because of the wide variety of liquidity pools available, which enable swapping between the most diverse set of assets on the ethereum blockchain. With Uniswap V3, the protocol also keeps getting better.

Uniswap V3 provides better rewards through what’s called concentrated liquidity, where liquidity providers can allocate assets to a liquidity pool within a custom price range, earning exponentially more in trading fees than in Uniswap V2 where all liquidity was added in the full price range, from 0 to infinity. In Uniswap V2, the majority of liquidity is never used in trading and liquidity providers thus earn less in trading fees.

But there is a drawback with Uniswap V3 in that liquidity providers must now actively manage their liquidity positions. That’s time consuming and comes with a lot of gas fees. That’s the issue we have solved with ICHI Angle Liquidity Vaults.

Does your newly launched product, Angel Liquidity Vaults, address common issues with Uniswap, such as high gas fees?

Yes, Angel Vault LPs do not have to pay gas to manage their liquidity positions because ICHI Angel Vaults manages the position for them. This is a big deal because one recent study done by the team at Bancor found that the vast majority of liquidity positions in Uniswap V3 — about 90% — is actually now outside of trading range and thus not earning fees!

Angel Liquidity Vaults allows LPs to earn higher trading fees for each dollar deposited. How does this benefit the end user of the protocol?

Angel Liquidity Vaults is unique because it provides better rewards for LPs and also has a number of important benefits for the protocols that launch Angel Vaults through ICHI.

Angel Liquidity Vaults is the second product launched by ICHI — the first is an incredibly novel protocol that enables any crypto project the ability to create a stable “branded dollar” that is worth exactly $1 and uniquely backed by the project’s native token. We’ve already successfully created branded dollars — which are important for providing liquidity in DeFi and conducting business in a stable unit of exchange — for the 1Inch, Filecoin, Uniswap, Shapeshift communities and others.

The benefits of Angel Vaults are even greater if a project creates a branded dollar with ICHI. When used together, Branded Dollars and Angel Vaults enable projects to lock their scarce crypto token within a Branded Dollar treasury and use that to create more Protocol Owned Liquidity. This removes supply in the open market and decouples a community’s native token from the price of ETH in a bear market, and provides a strong price floor in the case of a bear market downturn.

We’ve already seen the impacts of this with the first Angel Vault we launched for the ICHI community. While many projects have seen 20%+ declines in the value of their tokens in the last week, ICHI has remained stable. This is why we like to say that ICHI Angel Vaults are like bear spray for a bear market.

Using ICHI Branded Dollars and Angel Vaults together enables any protocol to turn Total Value Locked (TVL) into Assets under Management (AUM). When Branded Dollars are minted, scarce crypto is locked into a treasury that is governed by the protocol and its users.

According to an article by Nasdaq, half of the LPs on Uniswap are losing money. Do you think that’s true? Why/why not?

That is likely true for two reasons:

1) Liquidity providers on Uniswap V3 must actively manage their positions in order to earn fees — a process that is time consuming, confusing and expensive. Angel Liquidity Vaults automatically manages positions for LPs to maximize rewards.

2) Impermanent losses are created when the value of one asset changes in relation to the asset it is paired with in the liquidity pool. When this happens, arbitrageurs move liquidity across different Decentralized Exchanges to earn a profit. The pool is “rebalanced” and returns a different ratio of the two tokens provided as liquidity to the pool by the LPs. The profit gained by the arbitrageurs — because of the price changes — comes as a detriment to LPs who lose value.

How does Angel deal with the issue of impermanent loss, if at all?

There is always a risk of impermanent loss when depositing to a liquidity position on Uniswap v3 (if the price of a token falls to zero). Angel Vaults do not completely eliminate impermanent loss, but they mitigate it because you are depositing only dollar-denominated assets that support the price of the other asset in the pool.

The post Q&A with Bryan Gross, Steward at ICHI appeared first on Invezz.

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