Time for thread #3 in the Liquidity Management series! This time we’ll be taking a look at @ArrakisFinance
In case you missed them, here’s thread #1 (@steakhut_fi):
https://twitter.com/ValiantRes3arch/status/1661039890929442816
And thread #2 (@0xOrangeFinance):
https://twitter.com/ValiantRes3arch/status/1661715772752920577
Arrakis is really the OG when it comes to CLM
They manage LPs for a vast array of token pairs on UniV3 across Ethereum, Optimism, Arbitrum, and Polygon, commanding over $200m in TVL
So, how does it work?
Say you want to provide liquidity for the WETH/ARB pair, but don’t have the time to constantly manage it
Arrakis will manage those tokens for you in the most efficient way possible and pass the trading fees along to you (currently yielding 15.42%)
The best part, however, is the fact that Arrakis converts those tokens into ERC-20s rather than the standard UniV3 ERC-721s
Unlike ERC-721s, ERC-20s are compatible with most things in DeFi
That means it’s going to be way easier for other projects to build products that incorporate positions on Arrakis, which means more composability and therefore more potential growth ahead
So far, what I’ve described has only pertained to Arrakis V1
And if you liked that, you’ll absolutely love what’s in store for V2 – it takes capital efficiency to a whole new level!
First, positions can be split into different price ranges and fee tiers
For example, if you deposit USDC/ETH LP tokens, you could provide 20% of ETH liquidity between 2000-5000 and 80% between 2000-3000
Second, idle assets in LP positions (out of range, not earning fees) will be put to work earning yield in other DeFi protocols, potentially Curve, Lido, and/or Balancer
Third, users will be able to create custom vaults for anyone else to use
We love the permissionless products!
Technically, the V2 infrastructure is already live, so this can already be done – however, you have to know your way around smart contracts in order to use it
Now let’s talk about Arrakis’ first product on V2: PALM (Protocol Automated Liquidity Management)
This private service is geared towards DAOs, hedge funds, and anyone else who manages a treasury in DeFi
Arrakis works with these organizations to figure out the best possible way to manage their liquidity
Whether the goal is to create liquidity for a native token, diversify a treasury, or earn yield on protocol-owned liquidity, Arrakis is here to help
In less than 4 months since launching PALM, Arrakis has accrued over $2.2m in TVL for the service, earning users over $71k in fees
Not to mention around 20 protocols within DeFi are using it!
Arrakis gets a cut of these fees – about 50% to be exact, plus 1% of AUM
That’s some pretty solid yield for token holders….at least it would be if there was a token
Wen $SPICE??
Tesla frontrunning the partnership announcement... The spice will flow!
To me, it would make sense for Arrakis to launch their token along with public V2 vaults, which should legitimately be soon
The team says “definitely in 2023” although it seems like they’ve been teasing it more recently, and we’re only getting closer to V2 vaults
But who knows?
To read more about @ArrakisFinance and the broader liquidity management ecosystem of DeFi, be sure to check out my article here: https://valiantresearch.substack.com/p/liquidity-management-projects-part