Popsicle Finance’s Approach to DEX Liquidity Provider Yield Optimization Will Open Up DeFi to a New…

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Austin Barack

CoinFund’s Investment Thesis for Popsicle Finance

Popsicle Finance is tackling a largely unmet need in yield optimization across DEXs, taking a multi-chain approach that aligns with CoinFund’s thesis of multiple dominant layer 1s. Automated market makers (AMMs) catalyzed an explosion of innovation in DeFi by offering permissionless, peer-to-peer, decentralized token exchange, with improved liquidity unbounded by frictions of traditional order book models. This was the turning point for DeFi, paving the way for further innovation including lending protocols, governance tokens, yield farming, DEX aggregators, derivatives, and yield optimizers. These new primitives have created two primary forms of productive crypto assets: the AMM DEX liquidity provider (LP) positions that earn trading fees from swaps, and the staked DeFi governance tokens which accrue protocol earnings. LP positions have emerged as an asset class of their own, with $13.5B of TVL on just Uniswap v2, Uniswap v3, Sushiswap, and Balancer on Ethereum, and billions more on DEXs across Solana, Terra, Polygon, Fantom, BSC, and Avalanche. To effectively deploy capital, liquidity providers must weigh TVL in a pool vs. average trading activity (capital efficiency), governance token incentives by DEX, impermanent loss and hedging dynamics, and range management for concentrated liquidity provisioning. Popsicle Finance is building a multi-chain yield optimization network for DEX liquidity providers to eliminate much of this complexity, which we believe will greatly expand the addressable market and improve returns for this asset class. The project has focused initially on two product offerings, Sorbetto Fragola and Sorbetto Limone. These services will enable liquidity provisioning to expand from a user base primarily made up of early and highly technical crypto market participants to a global mainstream audience of yield seeking investors.

Sorbetto Fragola is an automated Uniswap V3 liquidity manager. Uniswap V3 concentrated liquidity provisioning was a major innovation in AMM design, allowing users to provide liquidity in specific price ranges versus across the entire curve.² However, it requires significant monitoring and can be cost-prohibitive for smaller LPs to actively manage. By utilizing Popsicle, Sorbetto Fragola programmatically allocates liquidity to the optimal range dependent on price action and by aggregating LP positions, it significantly reduces gas expenditures. Uniswap V3 is the #1 DEX by volume on Ethereum and has $1.2B in daily volume, $2.6B in TVL, and $2MM in fees generated daily for its liquidity providers.² Of that $2.6B in TVL, less than 1% is currently directed by automated liquidity management protocols.³

Sorbetto Limone is taking the Fragola tool set and bringing it cross-DEX and multi-chain. Limone will optimize yield across liquidity pools by shifting deposited assets to the pools with the highest yield. The salient feature is that this works across multiple DEXs and blockchains, utilizing bridges to shift capital to the highest yielding DEX pool on any supported blockchain. Limone will use custom oracles to factor in capital efficiency, yield farming incentives, transaction costs, and several other key characteristics to get customers the best yield. While other DeFi protocols such as Yearn Finance have made major innovations in and attracted significant capital tackling yield optimization for lending protocols and stableswap DEXs, Popsicle is leading innovation for yield optimization in AMM DEX LP positions.

The Popsicle team is betting on a multi-chain future for the DeFi space. The network, together with its token, called $ICE, is currently active across Ethereum, Fantom, Avalanche, and BSC. Deployments on Arbitrum, Moonriver, Polygon, and Solana are also planned. Popsicle was one of the first projects to implement cross-chain governance, with token holders on Ethereum, Fantom, and BSC all able to vote on proposals. Moreover, it will leverage composability to further enhance its product, using the primitives developed by sister project Abracadabra ($SPELL) and its decentralized stablecoin $MIM. MIM is minted collateralized by yield bearing assets, and in the future, Popsicle users will be able to leverage their exposure to liquidity provisioning by minting MIM collateralized against their Popsicle managed liquidity provider positions.

While the product and vision stand out, what truly sets Popsicle apart is the team and community. The team, led by Daniele Sestagalli and Squirrel Crypto, has a long term vision and is working to build products not just for today but for 1, 2, 5, and 10 years from now. They are intensely iterative, grounded in user feedback and their own experiences as long-time DeFi builders and users. Moreover, they are one of the most prolific teams building in DeFi today, developing not only Popsicle Finance but also Abracadabra and Wonderland, each working together as puzzle pieces towards their long term DeFi vision. Further, they have helped develop one of the most unique, active, and supportive communities in crypto. The Isvikingers (as the community is known), are active in pushing the project forward, with high participation rates in governance, driving strategic discussions on Discord, and helping to inform the product roadmap. This was never more apparent than following the hack that occurred in August (Popsicle had completed two audits prior to the hack). Although a definite setback, it inspired the team and community to dig deeper and build bigger. Sentiment never soured and a robust plan was approved to compensate those affected.

As Popsicle prepares for the imminent relaunch of its Sorbetto Fragola product, it has finalized two additional audits, implemented high profile bug bounty programs, and has announced a key strategic relationship with Perpetual Protocol. Popsicle Finance’s approach to yield optimization for the supply side of capital to DEXs will open up the ecosystem to new efficiencies and onboard new users. We couldn’t be more excited by what’s to come in the near, medium, and long term and look forward to working as an active supporter with the team and the Isvikinger community to drive the project forward!

Source: https://blog.coinfund.io/popsicle-finances-approach-to-dex-liquidity-provider-yield-optimization-will-open-up-defi-to-a-new-f70c6fbeb7d8?source=rss----f5f136d48fc3---4

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