AMMs have revolutionized decentralized finance (DeFi) by enabling fully automated decentralized trading and democratizing the opportunity to earn yield from market making and trading fees.

Yet liquidity providers (LPs) in AMMs like Uniswap face inherent risks including market risk and impermanent loss (IL) risk, which arise from changes in token prices and the passive price-finding mechanism of classic #AMM designs.

Whilst many different “IL protection” mechanisms have been proposed in the past (e.g. by Ondo, Tokemak or Bancor), these concepts cannot avoid IL, only compensate for it - which is not sustainable in the long run

An alternative is to actively adjust asset prices using an external oracle during market movements. This approach may avoid IL (depending on oracle quality), but introduces inventory risks from diverging token prices in imbalanced pools.

0xAmbe solves this challenge by disentangling the service of providing asset liquidity from the service of taking on risks, which allows for liquidity provision without IL-risk, inventory risk, or market risk for any token other than the one provided.

This is achieved through the use of single-sided swap pools and an incentivized "backstop pool" that takes on all market making risks, targeting seasoned DeFi users as LPs, while offering a low-risk profile for single-sided LPs in 0xAmber swap pools.

Deposits in the swap pools can as well be regarded as earmarked over collateralized loans to the backstop pool, which is using the assets for active oracle-guided market making on leverage.

Custom price curves for each swap pool and elaborated pool rebalancing mechanisms ensure optimal liquidity concentration around the oracle price, resulting in extremely low slippage and trading fees.

0xAmber is a significant step forward in terms of capital efficiency, risk reduction, and revenue optimization for assets where reliable and manipulation-resistant oracle price feeds exist, such as in the #Forex use case.

Deep liquidity in different fiat-pegged stable tokens, made possible by the low-risk profile of 0xAmber swap pools, can be a key factor in making Decentralized Forex (#DeFo) a viable option.

In conclusion, 0xAmber offers a new approach to liquidity provision in AMMs, addressing the risks associated with classic AMM designs and introducing innovative features for optimal liquidity concentration and risk reduction. #AMM #0xAmber #Soon