Visor Phantom: Active Liquidity Management For DeFi Projects
We first set out to build Visor to serve DeFi participants who want exposure to Uniswap v3 LP fees without having to spend the money and time to actively manage their positions. With over $12.5M TVL, 20+ managed pairs and $1M in fees generated for LP’s this is proving to be a successful approach.
However, our asset management technology stack can comfortably offer much more to key participants within DeFi, namely to the stakeholders of projects and their treasuries.
There are three categories of activity that we are opening up for DeFi projects to utilize under the umbrella of Visor Phantom.
The three categories of Visor Phantom are:
- Liquidity Mining
- Productive Treasury Management (Sustainable Grants)
- Co-Managed Liquidity (Co-Supervisor)
Liquidity Mining
In order to incentivize LP’s to provide liquidity for a token pair there needs to be either high returns from fees or additional rewards paid out in proportion to the liquidity being provided. The simplicity of liquidity mining staking contracts (for Uniswap v2 LP tokens) in the summer of 2020 is arguably responsible for DeFi’s boom.
The rules were simple: you deposited liquidity in Uniswap and then deposited your LP tokens in a staking contract to receive rewards. However, with the implementation of all possible price ranges of LP’s in Uniswap v3, a liquidity mining program is no longer an easy task for a project to implement.
A couple attempts have been created so far allowing projects to launch liquidity mining on Uniswap v3.
Both are essentially calculating the liquidity that is provided by each individual LP that is ‘in range’ and rewarding them respectively. The main drawback of these approaches is that the liquidity provider will not be rewarded if the price goes out of range and will need to pay for gas to unstake from the contract, manually change the range, and restake back into the contract.
Given the interest of regular DeFi participants in Visor’s asset management technology, protocols can incentivize liquidity on Uniswap v3 more efficiently using our stack, as participants in the program can delegate the active strategy portion to Visor, while earning rewards for the full liquidity they provide.
Liquidity mining capability has been natively built within the NFT smart vault structure of Visor. We first demonstrated the gasless subscribing of our vaults to reward hypervisor contracts in March. Using this similar process, we will allow LP’s who participate in a given managed pair on Visor to then subscribe to a reward Hypervisor that distributes rewards based on their LP shares.
Each liquidity mining program will be launched by the corresponding DeFi project. Each DeFi project using Visor Phantom maintains control of the liquidity, the price ranges and the reward distribution schedule. Given the capital efficiency that Uniswap v3 affords, we expect that protocols can incentivize the same amount of liquidity, for 10% of the cost compared to Uniswap v2 liquidity mining.
Following Uniswap v3 Math, if the strategy has a range of 40% around the current price, capital would be 10x as efficient, that is, with only 10% of the assets you could generate the same amount of liquidity for the pool as well as requiring a lower amount of inventory for LPs. Therefore, liquidity mining issuance could be reduced by a similar fraction and still offer the same amount of depth and thus slippage when swapping in the pool.
We have had many high quality, new DeFi projects reach out. Either they are planning to launch their token, or conducting an airdrop, or would like to transfer their liquidity mining activities over to to Uniswap v3.
We are excited to announce that the first DeFi project conducting a liquidity mining program through Visor Phantom is mStable. mStable governance came out in overwhelming support of switching their Uniswap v2 liquidity mining program over to Uniswap v3 and choosing Visor as the venue of choice.
Productive Treasury / Sustainable grants
There are many ‘grant programs’ or ‘ecosystem funds’ being established as treasuries of DeFi projects want to fund community members who contribute to the periphery of the project. The growing list of notable DeFi grant programs include Uniswap, Aave, Compound, and many more.
However, funding any meaningful effort with a DeFi project’s native token puts the treasury, the grant awardee and the community members at odds with one another. This naturally happens as funding significant operations requires fiat currency, and fiat currency requires (until now) the selling of the native token.
To draw on the most recent example look no further than the recipient of the latest Uniswap grant, DeFi Education Fund. Upon receiving 500k $UNI from Unswap’s treasury it immediately sold those tokens for $10.2M USDC. To no one’s surprise this created a heated debate within the Uniswap community around whether the $UNI should have been sold. We believe there is a better way to conduct grant programs that do not result in unintended grievances or volatility.
We believe the ‘sustainable grant’ process is a better way for DeFi projects to conduct their grant programs. With Visor Phantom, projects can make otherwise unproductive assets in their treasury, productive through achieving yield/return on the base treasury assets instead.
The sustainable grant implementation in summary is:
- Take base treasury assets and lend a certain amount to receive ETH.
- Then provide liquidity for your token pair, ETH / XYZ using Visor Phantom.
- Fees generated by the LP position (that would normally be reinvested into the position) go to the grant recipients.
The sustainable grant program is something that we built out with Flipside Crypto over the past month. Flipside had the novel idea of being able to use a Uniswap’s unused treasury tokens and get yield/returns in order to pay for external operations. Although there were a few issues surrounding the voting — many prominent DeFi participants noticed the importance, novelty and value of the ability to run a ‘sustainable grant program’. We are dedicated to fulfilling this vision through Visor Phantom for any project not just Uniswap.
Co-managed Liquidity / Supervisor
We understand that managing liquidity can be a complex and time-consuming task for a DeFi project. Most would rather focus on building and growing their core product but at the same time desire visibility and control of their own liquidity.
In combination with Gamma, we have created components for each action that can be taken when managing a liquidity position. This module is representative of a simple front end that each project would access after an initial onboarding process. There are various other implementations that teams can choose as well, such as a Telegram bot executing based on certain commands.
If you have a DeFi project and are looking for any of these solutions reach out to us…
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