Let’s dive into the story behind Unipilot!
Background: Liquidity on AMMs
Automated Market Makers (AMMs) such as Uniswap incentivize users to provide liquidity by rewarding them with the fees generated when other users trade. In a nutshell, providing liquidity allows you to earn more crypto in a sustainable manner.
With Uniswap v2, liquidity is distributed in an infinite range. While this allows for a simple user experience, it is very capital inefficient as a majority of liquidity is never put to use.
Uniswap v3 introduced concentrated liquidity, giving liquidity providers granular control over the price range their capital is allocated to. This allows for up to 4000x capital efficiency (using an extremely narrow range) relative to Uniswap v2, enabling LPs to earn higher returns and paving the way for low-slippage trading. Many more DEXs have since introduced concentrated liquidity too.
Complexities of Concentrated Liquidity
Concentrated liquidity also creates additional costs and complexities for users, as liquidity providers need to:
- Predict the optimal range for their capital
- Actively manage the position, as when the price moves out of their chosen range their capital becomes idle and stops earning fees.
- Pay to rebalance their position when necessary. This typically involves three transactions (remove, swap, re-add) and can cost ~$50 on the Ethereum network, effectively pricing smaller LPs out of the market.
Unipilot was built on top of existing decentralized exchanges to improve the experience for LPs, enabling more users to earn sustainable yield through liquidity provision. Unipilot:
- Selects the optimal range to maximize returns.
- Rebalances positions when necessary*, removing the need for the user to monitor their position and pay transaction fees for rebalances.
- Auto compounds earned fees back into active liquidity to further increase capital efficiency and returns.
*Actively-managed vaults only
Can Other Protocols Use Unipilot?
Unipilot has partnered with a number of projects to aid their journey in Defi. For projects, Unipilot:
- Ensures there is always active liquidity of their token.
- Reduces slippage during trades, limiting price volatility and enabling larger trades to take place.
- Reduces the cost of liquidity provision, as concentrated liquidity enables a greater liquidity depth to be achieved with far less capital.
- Makes it easier for their community to add liquidity themselves through the Unipilot user interface.
- Facilitates liquidity mining so a project can easily distribute its token to those who support it via providing concentrated liquidity.
If you’re a project looking to improve your DEX liquidity, get in touch with us via the form at the bottom of this page.
Where is Unipilot today and what’s next?
We have partnered with a number of projects to optimize their DEX liquidity, the most recent being Propy.
Keep an eye on us as we will soon be expanding to more DEXs and chains! If you have any questions or feedback, get in touch via Telegram.
Check out our explainer video for a visual representation of how Unipilot works.