🚨SHORTING IMPERMANENT LOSS🚨
There is $18 billion in liquidity on dexes in crypto suffering from IL daily
Shorting IL is GUARANTEED to be one of the next crypto narratives
A comparison of
@GammaSwapLabs
@SmileeFinance
@Panoptic_xyz
(mega) 🧵👇
There is $18 billion in liquidity on dexes in crypto suffering from IL daily
Shorting IL is GUARANTEED to be one of the next crypto narratives
A comparison of
@GammaSwapLabs
@SmileeFinance
@Panoptic_xyz
(mega) 🧵👇
1/35
In this thread I'll go through
1️⃣ LPing is like selling options
2️⃣ Impermanent Gain /Long gamma
3️⃣ @GammaSwapLabs
4️⃣ @SmileeFinance
5️⃣ @Panoptic_xyz
6️⃣ Product
7️⃣ Method
8️⃣ Fees and Leverage
9️⃣ Vision
🔟 Conclusion
In this thread I'll go through
1️⃣ LPing is like selling options
2️⃣ Impermanent Gain /Long gamma
3️⃣ @GammaSwapLabs
4️⃣ @SmileeFinance
5️⃣ @Panoptic_xyz
6️⃣ Product
7️⃣ Method
8️⃣ Fees and Leverage
9️⃣ Vision
🔟 Conclusion
2/35
Arbitrum and Ethereum is the home of lots of gigabrain defi innovations.
Sometimes its so gigabrain it's difficult to wrap your head around.
Let me break down for you the different protocols where you can short Impermanent Loss
Arbitrum and Ethereum is the home of lots of gigabrain defi innovations.
Sometimes its so gigabrain it's difficult to wrap your head around.
Let me break down for you the different protocols where you can short Impermanent Loss
3/35
1️⃣ LPing is like selling options
An LP provider will experience Impermanent Loss if the price if any of the assets in the LP has volatility
The IL moves in a concave function, you have IL no matter which direction the assets moves compared to each other
1️⃣ LPing is like selling options
An LP provider will experience Impermanent Loss if the price if any of the assets in the LP has volatility
The IL moves in a concave function, you have IL no matter which direction the assets moves compared to each other
4/35
The concave function mimics the payout structure of a short straddle, which is selling both Call and Put options and betting on that price doesnt move too much
But until now there have been no one to buy the options the LPs are selling
What if we could long the straddle?
The concave function mimics the payout structure of a short straddle, which is selling both Call and Put options and betting on that price doesnt move too much
But until now there have been no one to buy the options the LPs are selling
What if we could long the straddle?
5/35
2️⃣ Impermanent Gain / Long gamma
All of the protocols are building products to long volatility (long gamma) and/or options.
The idea is that you short the LP (going long the IL)
If the LP loses via IL, the long gamma position would earn the Impermanent Gain
2️⃣ Impermanent Gain / Long gamma
All of the protocols are building products to long volatility (long gamma) and/or options.
The idea is that you short the LP (going long the IL)
If the LP loses via IL, the long gamma position would earn the Impermanent Gain
6/35
LPs will deposit tokens into the respective protocols to earn additional APY on their LP position
This might increase liquidity in all of defi! 👀
The long gamma position would borrow the LP and short it (break LP), while paying fees and earning on potential IL
LPs will deposit tokens into the respective protocols to earn additional APY on their LP position
This might increase liquidity in all of defi! 👀
The long gamma position would borrow the LP and short it (break LP), while paying fees and earning on potential IL
7/35
By decomposing the LP and recomposing it into smart contract vaults the protocols can offer products where users can earn different option like payoff structures (with different leverage)
✅️ Long call
✅️ Long Put
✅️ Long straddle (long gamma)
By decomposing the LP and recomposing it into smart contract vaults the protocols can offer products where users can earn different option like payoff structures (with different leverage)
✅️ Long call
✅️ Long Put
✅️ Long straddle (long gamma)
8/35
The beautiful thing is that there is A LOT of LPers that always are looking for higher APRs
They can simply deposit their assets in one of the protocol vaults to earn extra yield on top of regular trading fees
The beautiful thing is that there is A LOT of LPers that always are looking for higher APRs
They can simply deposit their assets in one of the protocol vaults to earn extra yield on top of regular trading fees
9/35
Attracting liquidity should be much easier than for on-chain Options protocols using Decentralized Options Vaults, which often includes a very large tail-end risk for LPers
It can also offer these products for any asset with dex liquidity 👀
Attracting liquidity should be much easier than for on-chain Options protocols using Decentralized Options Vaults, which often includes a very large tail-end risk for LPers
It can also offer these products for any asset with dex liquidity 👀
10/35
3️⃣ @GammaSwapLabs
GammaSwap is an Oracle Free Decentralized Platform for Volatility Trading and Commission Free Token Trading
You can go long gamma by borrowing LP tokens to short them to make the LPs Impermanent Loss into your Impermanent Gain
3️⃣ @GammaSwapLabs
GammaSwap is an Oracle Free Decentralized Platform for Volatility Trading and Commission Free Token Trading
You can go long gamma by borrowing LP tokens to short them to make the LPs Impermanent Loss into your Impermanent Gain
11/35
LPs deposit tokens and earn trading fees and interest rates paid by borrowers, a payout which will always be higher than regular LPing
Gammaswap will offer leverage up to 33x.
LPs deposit tokens and earn trading fees and interest rates paid by borrowers, a payout which will always be higher than regular LPing
Gammaswap will offer leverage up to 33x.
12/35
GammaSwap can also repurpose the new primitive into perpetual directional call/put options (earn if market moves in a single direction) using different strategies
@ologai made the perfect infographics to describe GammaSwap
GammaSwap can also repurpose the new primitive into perpetual directional call/put options (earn if market moves in a single direction) using different strategies
@ologai made the perfect infographics to describe GammaSwap
13/35
There is obviously A LOT more to GammaSwap..
For more details on @GammaSwapLabs check out my detailed thread below
There is obviously A LOT more to GammaSwap..
For more details on @GammaSwapLabs check out my detailed thread below
14/35
4️⃣ @SmileeFinance
Smilee is building primitives for DVPs (Decentralized Volatility Products)
They are focusing on long/short gamma (volatility) via Real Yield or Impermanent Gain vaults.
The two vaults act as counterparties to each other
4️⃣ @SmileeFinance
Smilee is building primitives for DVPs (Decentralized Volatility Products)
They are focusing on long/short gamma (volatility) via Real Yield or Impermanent Gain vaults.
The two vaults act as counterparties to each other
15/35
Smilee can replicate the LP payoff adding an extra reward (via IG vault premium)
Or reverse engineer the IL payoff (leverage up to 500x) and turn it into Impermanent Gain (aka the opposite of IL) with their liquidity to volatility engine.
Smilee can replicate the LP payoff adding an extra reward (via IG vault premium)
Or reverse engineer the IL payoff (leverage up to 500x) and turn it into Impermanent Gain (aka the opposite of IL) with their liquidity to volatility engine.
16/35
Smilee don’t actually lend/borrow the LP to short IL - it's done synthetically, so there is a lot more product freedom (supported assets/pairs + high leverage)
The vaults can be repurposed into option-like, or any vol-based payoff function, with high capitial efficiency
Smilee don’t actually lend/borrow the LP to short IL - it's done synthetically, so there is a lot more product freedom (supported assets/pairs + high leverage)
The vaults can be repurposed into option-like, or any vol-based payoff function, with high capitial efficiency
17/35
There's a lot more planned for Smilee, so keep an eye out.
For more details on @smileefinance check out my detailed thread below
There's a lot more planned for Smilee, so keep an eye out.
For more details on @smileefinance check out my detailed thread below
18/35
5️⃣ @Panoptic_xyz
Panoptic is a perpetual, oracle-free, instant-settlement options trading protocol
✅ Oracle free Options based on UNI v3 LP pools
✅ Options never expire and are perpetual
✅️ Re-creates options like payoffs in a peer-to-pool model
5️⃣ @Panoptic_xyz
Panoptic is a perpetual, oracle-free, instant-settlement options trading protocol
✅ Oracle free Options based on UNI v3 LP pools
✅ Options never expire and are perpetual
✅️ Re-creates options like payoffs in a peer-to-pool model
19/35
✅️ Can use leverage (5x)
✅️ LPs deposit single assets and earns lending APY.
✅️ Options sellers borrows asset to create univ3 LP (short gamma)
✅️ Options buyers borrows LP and breaks it (long gamma)
✅️ Can use leverage (5x)
✅️ LPs deposit single assets and earns lending APY.
✅️ Options sellers borrows asset to create univ3 LP (short gamma)
✅️ Options buyers borrows LP and breaks it (long gamma)
20/35
✅ Premiums are decided by the fees that would have been accrued by the LP had it still been in uni v3.
✅ Premiums are decided by the fees that would have been accrued by the LP had it still been in uni v3.
21/35
Panoptic allows Options sellers to seamlessly create advanced Options strategies on Uni v3 with leverage that enables anyone to create options at any strike for any asset pair.
For more details on @Panoptic_xyz check out my thread below
Panoptic allows Options sellers to seamlessly create advanced Options strategies on Uni v3 with leverage that enables anyone to create options at any strike for any asset pair.
For more details on @Panoptic_xyz check out my thread below
22/35
6️⃣ Product
All protocols have created different products
✅ Lending/borrowing
✅ Vaults
✅ Options
✅ Short/long volatility
Out of the same theory. Let's take a look at some of the differences
6️⃣ Product
All protocols have created different products
✅ Lending/borrowing
✅ Vaults
✅ Options
✅ Short/long volatility
Out of the same theory. Let's take a look at some of the differences
23/35
7️⃣ Method
The method of implementation is very different for all protocols. Different DEXes can be used, some protocols lends and borrows the actual LPs, while some creates synthetic solutions.
Some are perpetual, some are epoch based
They also differ in oracle usage
7️⃣ Method
The method of implementation is very different for all protocols. Different DEXes can be used, some protocols lends and borrows the actual LPs, while some creates synthetic solutions.
Some are perpetual, some are epoch based
They also differ in oracle usage
24/35
8️⃣ Fees and Leverage
There are big differences in how interest is earned
The protocols offer very different leverage, but the leverage is offered on different notional.
8️⃣ Fees and Leverage
There are big differences in how interest is earned
The protocols offer very different leverage, but the leverage is offered on different notional.
25/35
9️⃣ Vision
So.. let me just say that all of these protocols have A LOT more in store than what we see discussed in this thread. This is but a short introduction, for the first iteration of the products.
9️⃣ Vision
So.. let me just say that all of these protocols have A LOT more in store than what we see discussed in this thread. This is but a short introduction, for the first iteration of the products.
26/35
🔟 Conclusion
It's extremely interesting to see 3 protocols build such different products based on the same thesis that a LP position is like selling options.
Three completely different implementation of the mechanics, and three very different products for the end users
🔟 Conclusion
It's extremely interesting to see 3 protocols build such different products based on the same thesis that a LP position is like selling options.
Three completely different implementation of the mechanics, and three very different products for the end users
27/35
@Panoptic_xyz is creating Options for Uni v3 LP, and in this way separates itself a bit from the other two protocols. It's a very interesting innovation, building purely on top of Uni v3
@Panoptic_xyz is creating Options for Uni v3 LP, and in this way separates itself a bit from the other two protocols. It's a very interesting innovation, building purely on top of Uni v3
28/35
@GammaSwapLabs and @SmileeFinance are a lot more similar in the products that the users can use, but they are implementing it in very different ways. This gives different risk profiles and possible use cases
@GammaSwapLabs and @SmileeFinance are a lot more similar in the products that the users can use, but they are implementing it in very different ways. This gives different risk profiles and possible use cases
29/35
GammaSwap uses a mechanism more like Aavee for LPs with their lending/borrowing mechanics, while Smilee is more similar to a vAMM synthetic dex like @perpprotocol in their approach.
GammaSwap uses a mechanism more like Aavee for LPs with their lending/borrowing mechanics, while Smilee is more similar to a vAMM synthetic dex like @perpprotocol in their approach.
30/35
This gives GammaSwap possibility to deliver perpetual and oracle free options, while Smilee has more flexibility and can deliver very high capital efficiency and leverage, and create just about any volatility-based payoff.
This gives GammaSwap possibility to deliver perpetual and oracle free options, while Smilee has more flexibility and can deliver very high capital efficiency and leverage, and create just about any volatility-based payoff.
31/35
I'm very excited to see all three go live. I'm pretty sure we will see many more build on the same theory in the future
One of my favorite effects of these protocols are that they can enable volatility trading and options for basically any asset
I'm very excited to see all three go live. I'm pretty sure we will see many more build on the same theory in the future
One of my favorite effects of these protocols are that they can enable volatility trading and options for basically any asset
32/35
I'd wager at least one of the protocols who successfully gains adoption with a product to solve Impermanent Loss will become a defi powerhouse and crypto blue-chip
I'd wager at least one of the protocols who successfully gains adoption with a product to solve Impermanent Loss will become a defi powerhouse and crypto blue-chip
33/35
Remember that this is definitely NOT FINANCIAL ADVICE, these are early stage protocols, and need to prove they can deliver the products they are building.
But now hopefully you know a bit more about the difference of the protocols who are building products to short IL
Remember that this is definitely NOT FINANCIAL ADVICE, these are early stage protocols, and need to prove they can deliver the products they are building.
But now hopefully you know a bit more about the difference of the protocols who are building products to short IL
34/35
Tagging some defi gigachads that I've seen writing about shorting IL
@JiraiyaReal
@crypto_condom
@DAdvisoor
@rektdiomedes
@DeFi_Cheetah
@crypthoem
@TheDeFinvestor
@bizyugo
@squirrelcrypto
@knowerofmarkets
@andrewsaunders
@kindahangry
@defi_mochi
@ologai
@ThorHartvigsen
Tagging some defi gigachads that I've seen writing about shorting IL
@JiraiyaReal
@crypto_condom
@DAdvisoor
@rektdiomedes
@DeFi_Cheetah
@crypthoem
@TheDeFinvestor
@bizyugo
@squirrelcrypto
@knowerofmarkets
@andrewsaunders
@kindahangry
@defi_mochi
@ologai
@ThorHartvigsen
35/35
I hope you've enjoyed this thread and are one step closer to become an impermanent gigabrain
Follow me @Slappjakke for more alpha and defi deep dives
I put a lot of effort into this thread and would love your support by Like/Comment/Retweet on the first tweet below
I hope you've enjoyed this thread and are one step closer to become an impermanent gigabrain
Follow me @Slappjakke for more alpha and defi deep dives
I put a lot of effort into this thread and would love your support by Like/Comment/Retweet on the first tweet below
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