Jun 2, 2022
May 30 BNB Chain x iZUMi Finance AMA Recap
Introduction
On May 30, BNB Chain Community held an Ask Me Anything session with iZUMi Finance. The AMA kicked off around the recent launch of iZiSwap, the first Discretized-Liquidity-AMM DEX with maximized capital efficiency on BNB Chain. Heated discussions around DeFi and liquidity had lasted for nearly 2 hours. Dima, the Community Head of iZUMi Finance, attended as a guest with PamPo from BNB Chain serving as the host.
Here are the recaps of the AMA:
PamPo
Can you give us some background information on iZUMi Finance?
Dima
Sure, happy to do so! iZUMi Finance is the first Multi-chain DeFi protocol Providing One-Stop Liquidity as a Service (LaaS) to support “programmable liquidity mining” and extend concentrated liquidity service for multi-chains. Right now, iZUMi Finance is deployed across Ethereum, Polygon, Arbitrum, and recently BNB Chain. iZiSwap is exclusive to BNB Chain.
iZUMi Finance allows the liquidity providers (LPs) to not only trading assets efficiently but also to earn trading fees and get additional incentives from the platform and projects, similar to SushiSwap and PancakeSwap’s double farming.
On the other hand, iZUMi can not only help LPs make more money, but it can also help projects attract liquidity more efficiently.
PamPo
What are your opinions on the current market of DeFi? What are some of the solutions that iZUMi presents to the market?
Dima
Yes, the Liquidity as a Service (LaaS) was offered with the much-discussed DeFi 2.0. Tokemak and Olympus Pro are using LaaS to try to solve a very important problem: how to incentivise on-chain liquidity more precisely and effectively.
Every token’s liquidity is very important since if it can’t be exchanged, it loses its value. Both Gamefi and Socialfi need a place for transactions on chains, thus who will provide the liquidity for transactions is a very significant concern.
iZUMi provide two main functions:
* LiquidBox: A Non-custodial Solution for Programmable Liquidity Mining on Uniswap V3
* iZiSwap: The First Discretized-Liquidity-AMM DEX with Maximized Capital Efficiency
In iZUMi, concentrated liquidity is used in the bottom layer transaction, capital efficiency can be hundreds of times higher than xy=k DEXs. In addition, the project side can give LPs with liquidity incentive tokens, which has big rewards.
PamPo
Thank you for the answer! You guys recently announced that you will be providing liquidity service for BitDAO on Uniswap V3. How does iZUMi help big projects like BitDAO to manage their liquidity?
Dima
This is a very good question! Right now, LiquidBox provides three different models of liquidity mining. They’re Fixed-Ranged, One-Sided, and Dynamic Range. Protocols of different capital sizes can choose to manage their liquidity in one of these three ways.
The first one is the Fixed-range model, which best serves stablecoins and pegged assets, because the Projects can only provide liquidity mining rewards for a narrowed price range to increase the price stability. But it could also serve big projects like BitDAO to provide liquidity incentives for a broad price range, which can enable it to enjoy the high capital efficiency trading from Uniswap V3 but also not to worry about the increase of IL from normal market price volatility.
The Dynamic-range could also serve big protocols with unstable Assets. It will provide incentives for LP providing liquidity around current market price, which can help the projects to increase on-chain liquidity depth and also provide additional rewards for Liquidity providers and compensate IL.
The One-sided model is more suitable for emerging assets, which can provide one-sided IL protection and down-sided Liquidity depth enhancement. This will both benefit LP and the protocols for emerging assets.
PamPo
Let’s talk about iZiSwap. Congrats on your successful launch on BNB Chain! iZiSwap introduces a new AMM model called Discretized-Liquidity-AMM model. Can you explain it in a simple way? How does it achieve high capital efficiency?
Dima
Sure, firstly AMM (Automated Market Maker) is widely adopted for nearly all the DEXs, while all of them provide AMM in a continuous way, which means liquidity is spread across a continuous price range. Discretized-Liquidity AMM makes liquidity deployed in every price tick and reduces slippage when swapping tokens.
Uniswap V3 introduced the Concentrated Liquidity model, making Liquidity positions effective in certain price ranges. DLAMM cuts these price ranges into small narrow pieces, making these price ranges close to 0. DLAMM further enhances capital efficiency by making liquidity at every price range be needed.
PamPo
I use PancakeSwap daily to do small transactions. What makes me want to use iZiSwap instead of Pancake?
Dima
Every penny counts. If you do small transactions daily, you do want to place limit orders at exact prices to save up some transaction fees. BTW, you’re also protected from being front-run.
PamPo
What do you do to ensure safety? Is my money safe on your platform?
Dima
Our first priority is security. As a result, we use the “non-custodial” option. That being said, any liquidity on our iZiswap is obvious. iZUMi serves as a non custodial DeFi platform. Any money held by the users, including LP tokens staked on the iZUMi platform, are stated in the smart contract to be returned only to the user’s wallet address under any conditions. It can totally reduce security risks. It has also been thoroughly tested by Certik and Blocksec, as well as the investors’ internal security teams like Bybit, Huobi and Cobo, to ensure its safety. The “non custodial” technique can increase iZUMi’s security level by an order of magnitude over other projects that use the controlled Vault system.
PamPo
Can you please share some insights on stablecoin assets? Curve and Uniswap seem to be strong competitors of each other, what do you think?
Dima
Stablecoin is really the hottest topic in the market at the moment, especially with the UST’s depeg thing these days, the market reaction is very intense. Let’s take USDT/USDC as an example, we can see that now Curve has 9 times more USDT/USDC TVL than Uniswap V3, but according to Dune’s data, Uniswap has surpassed Curve in terms of trading volume of stable coin pairs.
For the MakerDAO $DAI pair, which is the most negatively impacted by the 4Pool proposal, Uniswap V3 already carries the largest volume of transactions at the moment and only a small portion (less than 5%) of DAI’s transactions with USD stablecoins on Curve. The DAI pairs with other mainstream coins also provide sufficient trading depth to ensure that DAI’s liquidity and usage scenarios are supported across the on-chain liquidity market.
Based on the innovative design of the Uniswap V3 centralized liquidity AMM, liquidity providers for stablecoin pairs can concentrate liquidity around 1, for example, the DAI/USDC pair liquidity is concentrated in the (0.999, 1.001) price range, which greatly reduces the slippage in trading of stablecoin assets compared to traditional AMM, and therefore also provides another option other than curve for trading stable assets.
The Fixed-range mining model, which was mentioned above, not only accommodates the need for concentrated liquidity for price-stabilized assets, but also allows Uniswap V3 to directly benchmark Curve’s CFMM algorithm + CRV token incentive model with the support of liquidity mining on the iZUMi platform. The Uniswap V3 liquidity provider could also receive an additional liquidity mining bonus in addition to the transaction fees.
iZUMi supports liquidity mining of Uniswap V3 USDC/USDT pairs in Ethereum, Polygon, and Arbitrum on this model, with 87% of the $4.7M liquidity of Uniswap V3@Polygon USDC/USDT pairs participating in iZUMi liquidity mining ($4.1M). Also in the Uniswap V3@Arbitrum USDC/USDT liquidity pool, the $13.3M TVL in the iZUMi platform accounts for 95% of the total pool ($13.95M). Such a large TVL liquidity mining participation rate has well proven its attractiveness to holders of stable assets and has significantly increased the liquidity funding and trading depth of the corresponding pairs.
Compared to the current 9.5% APR yield offered by Curve+Convex, Uniswap V3 can achieve a 1.5% yield for liquidity providers based on fees, on top of which it only requires 8% APR for liquidity mining through iZUMi Finance to compete. Half of this is provided by iZi platform token mining, and the remaining half is the corresponding liquidity funding cost for the project side: only 4%.
This is a significant improvement in cost and efficiency compared to the liquidity funds obtained by relying on traditional AMM’s ERC-20 LP token liquidity mining incentive, or the liquidity funds obtained by competing for Curve eco-incentive distribution governance as we analyzed earlier. Project parties can obtain better on-chain liquidity and provide better transaction experience for users through lower funding cost, which also satisfies the purpose of accumulating their own token usage scenarios for algorithmic stablecoin project parties like Terra and Frax.
Therefore, for this type of stable asset projects, it may be a lower cost and more efficient liquidity option to migrate liquidity to the centralized liquidity range on Uniswap V3 by conducting liquidity mining incentive activities through the iZUMi LiquidBox platform.
PamPo
Why BNB Chain? What’s taken into consideration when you decided to launch your project here?
Dima
We will give a pretty straightforward answer. BNB Chain has the largest user base among all alt-chains besides Ethereum, and can generate high enough transaction fees. We observed that 99% of DEX on BNB Chain still use the old-fashioned v2 model. We decided to present iZiSwap to the user base here on BNB Chain to help them save more and earn more!
About iZUMi
iZUMi Finance is a multi-chain DeFi protocol providing One-Stop Liquidity as a Service (LaaS). Its philosophy is that every token deserves a better on-chain liquidity in an efficient and lasting way. Deployed on Ethereum, BNB Chain, Polygon, and Arbitrum, iZUMi has provided liquidity services for BitDAO and 10+ protocols, and managed over $60M liquidity from reputable institutions and 8,000 individual LPs.
