On Mangrove's order book, all offers can be fully customized using pieces of code, offering unparalleled flexibility to meet the specific needs of users and DeFi strategies.

The Mangrove team has developed an application example by creating Kandel, an automated trading grid. Kandel replicates the functioning of an AMM but in a discrete (non-continuous) way: the LP takes profit from the spread between bids and asks at defined price points. Thanks to its operation, with parameterized reposting of offers, it exploits price oscillations within a predefined range and proves to be more profitable than traditional AMMs to compensate for impermanent loss. It allows adaptation to risk appetite and market condition assessment by the manager who selects the parameters. A complete description of Kandel, its functioning, and its advantages can be found in our dedicated article.

Thanks to Mangrove's customizable offer approach, Kandel can be made even more powerful by activating liquidity sourcing. For example, the Mangrove team has connected Kandel to the AAVE lending protocol, allowing the liquidity to generate income on AAVE when it is not used for an order in the Kandel strategy. This integration has also been audited.

To better understand this extension of Kandel, named Kandel Aave, we have published an article “Extending Kandel: How to Source Liquidity from Any DeFi Protocol”, which we invite you to read.

Who Manages the Kandel Vaults on Mangrove?

Rather than letting users manage the complex parameters of Kandel themselves, we leave this task to specialized vault managers. Currently, our first partner for this management is Redacted Labs, which has deployed and manages several vaults on Mangrove.

How Does Redacted Labs Manage the Vaults?

Market Analysis and Strategy

Redacted Labs' first task is to analyze the market. Volatility is crucial for deciding whether to deploy capital in a Kandel strategy or not. Once invested, analyzing the market to find how to maximize the oscillations within the range can enhance profits. Redacted Labs' vault strategies are prudent ones, focusing on beating IL.

Kandel Parameters

Redacted Labs then adjusts several key parameters to optimize performance:

1. Range: They position the range and define its width (from which price to which price Kandel operates). A narrow range concentrates liquidity on a precise area and helps to beat IL, while a wider range reduces this level of concentration but protects against the shortfall of not having active liquidity.

2. Spread: The spread determines the gap between price points within the range. A narrower spread potentially allows accumulating small frequent profits, while a wider spread increases unit profits but with an increased risk of IL or shortfall if too few price points of Kandel's grid are crossed by the market price.

3. Step Size: This parameter is implemented to define by how many price points each new Kandel order is automatically reposted. This parameter also affects the profit/risk ratio.

4. Inventory: They can adjust the quantity of each asset in the vault.

5. Stopping Kandel: In case of strong directional volatility, they can temporarily deactivate Kandel, allowing the inactive liquidity to generate interest on AAVE until the market stabilizes.

   Notes: Kandel Aave is a customizable product that the Mangrove team has developed and had audited, but it is possible to build on top of Kandel by integrating other sources, applying other rules to it, or even modifying its operation with other profit-taking strategies and asset inventory management.
   

Precautions and Security

In addition to these strategic adjustments, Redacted Labs takes several measures to ensure optimal management:

• Vault Caps: Vaults are capped at 250,000 USD to limit risks in case of high influx.

• Rewards Eligibility: Vault LPs are eligible for MGV rewards, allowing them to receive a share of the rewards from our incentive program.

• Audits and Monitoring: The vaults have been audited by Nethermind, and Redacted Labs has set up a sophisticated alert system to detect economic and technical anomalies.

• Regular Strategy Reviews: Strategies are re-evaluated each week, and in the case of vaults on Mangrove, daily management is provided to maximize their efficiency.

Available Pairs and Future Development

Currently, several vaults are managed by Redacted Labs:

• WBTC-USDT

• ETH-USDC

• ARB-USDC.e

• weETH-WETH

• USDC-USDT

And others are under development. What’s coming next on Mangrove regarding vaults?

• Detailed Vault Performance Insights: A chart on each vault’s page will offer comprehensive data visualization for vault performance.

• Enhanced APR Calculations: The APR will be more accurate, now including incentives for a clearer view of earnings potential.

• Single Asset Deposits: An upcoming feature allowing single-asset deposits, making  Mangrove vaults even more accessible.

We will keep you informed of updates and new opportunities on our platform.

With Kandel, Mangrove pushes the limits of DeFi by offering an innovative and customizable trading grid preset strategy: Kandel. Thanks to partners like Redacted Labs, users benefit from expert and secure management while enjoying new yield opportunities in the market.

To learn more, explore our dedicated articles and stay connected to discover the latest news on Mangrove.

Want to create your own vault?

Redacted Labs and Mangrove are here to support you:

• Connect with Redacted Labs on X for expert guidance.

• A dedicated room for vault managers is open on Mangrove’s Governance Forum: forum.mangrove.exchange.

Start building your vault today!