There are endless options in DeFi users when it comes to yield generation & trading - what can we offer that others can not?

In this article we will take an introductory look at the benefits Artichoke offers for:

• Liquidity Providers (LPs)

• Traders

• Projects

Benefits for Liquidity Providers

Artichoke allows for single-sided liquidity provision, solving the issue of impermanent loss present in pair-based pools.

Quick refresher on impermanent loss (IL)

IL is a consequence of how assets are priced by Automated Market Makers such as Uniswap or Pancakeswap - prices are determined by comparing the balances of both tokens in a pool.

When you provide liquidity for a pair, say ARB/ETH and one of the paired tokens changes in price significantly, you can end up in a position where simply holding both assets, instead of providing liquidity, would have resulted in larger profit or lower loss compared to LPing and earning fees.

For a more detailed look at IL, read this article.

Back to single-sided liquidity - Artichoke does not have separate pools for individual pairs, but instead a virtual universal pool called the Omnipool comprised of “tails” - which represent available liquidity for each individual token in the Omnipool.

This allows users to provide just a single token to the pool - the protocol then lends the respective amount of $USDC from the $USDC tail, effectively creating a virtual pair.

How it works for non-$USDC LPs:

• User provides $500 worth of $ARB to the Omnipool, by adding it to the $ARB tail

• Artichoke lends the user $500 USDC to create a virtual liquidity position for $1000 worth of ARB/USDC

How it works for $USDC LPs:

• User provides $500 worth of $USDC to the Omnipool, by adding it to the $USDC tail

• Artichoke pairs the 500 $USDC proportionally with all assets in the other tails and creates a virtual liquidity position for $1000 worth of USDC/tCHOKE

• more about tCHOKE, our synthetic liquidity token can be found here

This ability to deploy single sided-liquidity and protection from impermanent loss are the core benefits Artichoke can offer liquidity providers - they no longer need to own or acquire both tokens for a pair of choice, track prices for both assets individually and endure continued exposure to IL.

Benefits for Traders

Token swaps through the Artichoke Omnipool carry minimal slippage and fees, since there is no repeated swapping across multiple isolated pairs (multi-hops).

In pair-based pools, if a trader wanted to swap say $LINK for $USDT on Uniswap on Ethereum, the trade would be routed something like this:

1. $LINK > $WETH (swap fees & slippage apply)

2. $WETH > $USDC (swap fees & slippage apply)

3. $USDC > $USDT (swap fees and slippage apply)

In an Omnipool setting, the swap would look like this:

1. $LINK <> tCHOKE <> $USDT (swap fees and slippage apply)

You can probably guess which one carries lower fees and slippage.

This minimization of hops along with the deeper liquidity even for very niche tokens within the Omnipool offers traders an unmatched experience in terms of swap fees and slippage.

Benefits for Projects

Treasury management is crucial to long term project success and sustainability, especially in DeFi.

Many teams are in stuck between a rock and hard place, with their treasuries consisting largely of their own project tokens, with no ability to sell on the open market without hurting their credibility and holder community.

So while many, especially early stage, projects seem well funded on paper - their actual runway is much shorter since only a fraction of their treasuries is held in stablecoins or majors.

Artichoke’s single-sided liquidity offers a way to utilize large amounts of otherwise idle treasury funds to earn yield and fund operations without having to sell the native token.

By using their native treasury tokens to set up a tail for the Omnipool, projects not only establish a source of sustainable yield, they also deepen liquidity for their token and unlock the benefits for traders listed above for their own community.

To answer the initial question of what we can offer - improvements upon existing DeFi infrastructure for liquidity providers, traders and projects alike.

This ambitious approach is our core mission and how we aim to establish Artichoke as a key protocol on Arbitrum and beyond.

For further information on tCHOKE, our synthetic liquidity token, please refer to this post.

More info on Artichoke’s design can be found on Gitbook and Twitter - explainers on the individual elements will also be published on Mirror shortly.