From liquidity to capital-efficient liquidity
The decentralized finance (DeFi) ecosystem has witnessed remarkable growth, partly driven by the advent of concentrated liquidity market makers (CLMMs) like Uniswap V3. These decentralized exchanges (DEXs) have improved over the first generations of automated market makers (AMMs) like Uniswap V1 and V2 and significantly enhanced capital efficiency and returns for liquidity providers (LPs) by allowing them to provide liquidity in specific ranges rather than from zero to infinity as was the case before. However, by making liquidity provision more granular and sophisticated, they've also introduced new challenges, including higher costs due to continuous rebalancing and more severe Impermanent Loss (IL), the potential loss that LPs incur when the price of the provided assets fluctuates.
Source: DeFiEdge whitepaper
In response, a new generation of market-making protocols has emerged, built as layers atop AMMs like Uniswap. These protocols, whose logic is encoded in smart contracts, offer a range of sophisticated liquidity management practices, including compounding, rebalancing, and dynamic liquidity ranges. Gamma and Arrakis, for example, use vaults, non-custodial position manager contracts that manage a liquidity pool with strategies like the ones mentioned above. Though dynamic and non-custodial, these protocols are automated, and their strategies rely on smart contracts, an approach that presents limits like excessive rigidity and frontrunning risk due to smart contract transparency. This is why Arrakis, on top of predefined strategies encoded in smart contracts, also added vaults managed by professional market makers for a more sophisticated mix of on-chain and off-chain strategies.
Source: DefiLlama
DefiEdge: Adaptive Liquidity Management
DeFiEdge is an advanced liquidity active management protocol, offering solutions to the challenges faced by LPs on Uniswap V3 while improving the active management approach of Gamma and others. DeFiEdge connects liquidity providers with professional strategy managers, who actively oversee and optimize user-provided assets, enabling LPs to capture amplified yields without constantly monitoring market fluctuations and manual rebalancing. Unlike smart contracts in automated active management protocols like Gamma, professional liquidity managers can flexibly adapt their strategies to dynamic market conditions and actively pursue profitable opportunities, ultimately delivering higher returns. In essence, DeFiEdge exemplifies the 'intent-based architecture', where users express their goals and leave the practical execution to a network of experts, a similar approach to other popular protocols like UniswapX or Flashbots SUAVE.
How DeFiEdge Works
DeFiEdge facilitates permissionless and decentralized liquidity provisioning. Anyone can establish a liquidity management contract using the protocol's factory contract. Liquidity providers can then deposit their assets into these contracts to earn returns, all while strategy managers collaboratively optimize their positions. These managers ensure that user funds consistently remain within the active liquidity range by rebalancing them in response to deviations from the initial trading price. Notably, rebalancing positions on UniswapV3 through DeFiEdge smart contracts occurs in larger blocks, which reduces the frequency of actions taken by all users and minimizes the relative impact of gas fees. As a result, DeFiEdge creates a scalable layer atop UniswapV3 pools, enabling the collective management of multiple individual positions.
On top of some predefined default strategies, DeFiEdge further extends its accessibility by providing permissionless factory smart contracts, allowing anyone to become a strategy manager. Users can invest in their preferred strategies and managers, considering factors like manager profiles, performance consistency, generated APYs, and management fees. Crucially, all the funds within these strategies are securely held in smart contracts, ensuring a non-custodial environment. Strategy managers are granted the authority to rebalance positions solely to generate higher yields.
In conclusion, active market makers like Arrakis and DeFi Edge offer a level of sophistication that rivals centralized exchanges (CEXs), enabling users to have their funds managed by professional experts while operating entirely on-chain. This approach ensures the protocol remains non-custodial, eliminating concerns about market makers misappropriating funds. The goal is to combine the best aspects of both worlds, providing users with the benefits of professional management within the secure and decentralized DeFi environment.
Horiza: The Revolutionary DEX with DeFiEdge Integration
Now, imagine taking this innovative liquidity management approach and integrating it into a Concentrated Liquidity Automated Market Maker (CLAMM) with ve(3,3) tokenomics. The result, nothing short of revolutionary, has a name: Horiza. Horiza is an innovative DEX built on the Arbitrum blockchain boasting a range of winning features:
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CLAMM Efficiency: Like Uniswap V3, Horiza empowers LPs to contribute liquidity within specific ranges, optimizing capital efficiency.
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Ve(3,3) Tokenomics: Inspired by the designs of protocols like Solidly, Horiza combines veTokenomics with a (3,3) game-theory approach. This incentivizes stakeholders to stake native reward tokens, aligning interests and fostering active engagement within the network.
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Active Liquidity Management through DeFiEdge Integration: Here's where Horiza truly shines. By seamlessly integrating DeFiEdge, Horiza offers users access to active liquidity management provided by professionals.
How the Integration Works
Within Horiza, DeFiEdge takes on the role of automated liquidity manager (ALM), enabling the protocol to rebalance LPs' positions automatically. Leveraging DeFiEdge's battle-tested and proven strategies, Horiza empowers LPs to maximize their returns while significantly reducing the impact of slippage and impermanent loss.
In its initial phase, Horiza will provide access to default strategies offered by DeFiEdge. However, the exciting part is that Horiza plans to expand this capability by allowing users to create custom strategies. This addition will further enhance flexibility and empower LPs to tailor their strategies to specific preferences and objectives.
In conclusion, Horiza represents a groundbreaking fusion of cutting-edge liquidity management and tokenomics.
Empowering Your DeFi Journey with Horiza
In the dynamic world of decentralized finance (DeFi), where innovation knows no bounds, Horiza emerges as a beacon of transformation. This article has journeyed from the evolution of liquidity provision championed by Uniswap V1-V3 to the inception of active liquidity management through DeFiEdge, culminating in the groundbreaking integration with Horiza.
Now, it's your turn to embark on a DeFi journey like no other. Head to Horiza's website and join our community to experience the future of decentralized exchange. With Horiza, you can navigate the ever-evolving DeFi landscape with confidence, efficiency, and profitability. Don't miss out on this revolutionary opportunity!