Introduction

Today, we’re really excited to finally announce Orange Finance we’ve been working on behind the scenes for a few months. Orange Finance is an Automatic, Efficient, and Market Neutral Liquidity Manager on Uniswap v3.

Since Uniswap v3 launched, users have struggled with liquidity provision. Few users benefit from the capital-efficient model of Uniswap v3, and thus the DEX fails to attract liquidity providers as expected.

Liquidity provision on DEX is like becoming a market maker in the TradiFi market. Market makers are usually expected to earn fees regardless of market directions, thus they need to place strategic and market-neutral positions in a market.

Nevertheless, providing liquidity on the DEX is indeed a bullish bet. Moreover, Uniswap v3 brought more complexity to liquidity providers like setting a price range, fee tier, and rebalancing.

We will utilize the past and best knowledge of TradFi and build the best liquidity management algorithm in DeFi DEX liquidity providing so as to maximize liquidity in the DeFi ecosystem.

Problem

Uniswap V3 is built to achieve up to 4000 times more capital efficiency compared to the previous version by concentrating the liquidity around the current price.

Though Uniswap v3 brought potentially more capital efficiency with the concentrated liquidity model to users, it requires frequent rebalancing and a much higher level of liquidity management compared with Uniswap v2.

Liquidity management is inevitable for Uni V3 positions since its position may experience an Impermanent loss if not actively monitored the position, or it may be out of range and this stops earning fees from trading.

Existing automated liquidity management protocols allow users to deposit liquidity to Uniswap v3 pools without being bothered by complex operations. They set, however, a relatively wider price range so as to avoid frequent rebalancing incurring impermanent losses. Giving up maximizing the capital efficiency, they brought user-friendliness to users on Uniswap v3.

We, Orange Finance, automate liquidity management on Uniswap V3 and other concentrated liquidity-type DEXes, achieving maximize capital efficiency of Uniswap v3 with a narrower price range by hedging delta.

Solution

Orange Finance allows users to earn a real yield, and maximized trading fee, from Uniswap v3 with the following features;

• Delta hedge to maintain delta-neutral position on liquidity

• Smart Liquidity to set optimal range and fee tiers depending on volatility

• Auto-rebalance to automatically rebalance and compound accrued fees

• Fungible liquidity positions to make LP positions for a pair tradable.

• L2 native to support frequent rebalancing

• Multichain support to support many trading pairs

Orange Finance will be the best solution for the next generation of DeFi lego blocks. We will maximize your fee return, lower your risk exposure and rebalance your position automatically.

Delta hedge

To provide liquidity on Uniswap, you can only take a "positive delta" position, which means you cannot benefit from bearish token pools. By hedging the delta of a liquidity pair, however, you can take a neutral position in the market moving in any direction.

Orange Finance will provide a negative delta by using Aave, a decentralized lending protocol. It is easy to provide a negative delta by using the lending protocol.

Smart Liquidity

Volatility can be simulated by applying the GARCH model. Generalized AutoRegressive Conditional Heteroskedasticity (GARCH) model is a statistical model used in analyzing historical data where the variance error is believed to be serially correlated. It is commonly used to estimate volatility. After that, the Monte Carlo simulation will be applied to decide the price range of an asset.

Monte Carlo Simulation is a mathematical approach that generates random numbers for simulating the Gaussian distribution price of the asset. This approach is one of the most popular approaches to analyzing the price of the asset.

By applying the volatility calculated from GARCH and simulated many times by Monte Carlo Simulation, the Smart Liquidity will set an optimal range for a liquidity pair that enables users to provide the highest capital efficiency.

In the TradFi market, when market volatility is high, it is common for a market-maker to set a wider bid-ask spread for a pair. Likewise, Orange Finance may set higher fees for a liquidity pair when market volatility is high. This fee setting can be achieved by actively monitoring market conditions and changing fee tiers accordingly.

Auto-rebalance

As it is essential for Orange Finance to maintain an optimal position, Orange Finance frequently changes liquidity provision settings with ranging, fee tiers, and hedge positions. When rebalancing, Orange Finance watches markets 24/7, and when market conditions change, it automatically operates rebalancing as well as automated fee accruals.

Fungible liquidity positions

Uniswap V3 positions are represented as ERC721 tokens, however, with Orange Finance, each liquidity in the same pool can be represented as ERC20 tokens, making Uniswap v3’s LPs to be used in other DeFi protocols

As an ERC20 token standard, Orange LP tokens can be used for liquidity mining to incentivize holders to provide concentrated liquidity around certain price ranges to get more incentives

L2 native

Since It is essential to maintain optimal liquidity settings, L2’s lower gas fee nature is a perfect environment for Orange Finance. As the L2 ecosystem evolves, there will be more space for Orange Finance to provide its LP services.

Multichain support

Orange Finance is committed to supporting as many liquidity pairs as possible. We will deploy our product to many L2 networks.

What’s Next?

The Orange dev team is preparing alpha testing on the Arbitrum network. Alpha testing is a closed test for a limited number of DeFi users to try our protocol and get a chance to be our first community members. You can front-run the majority of DeFI users by signing up for our waiting list. Once details are ready, we will announce more on our upcoming alpha launch.

About Orange Finance

Orange Finance is an Automatic, Efficient, and Market Neutral Liquidity Manager on Uniswap v3.