Unbound X DefiEdge AMA Recap
On the 13th of January’23, Unbound Finance hosted an Ask Me Anything (AMA) session with Nishchal, CMO at DefiEdge. The AMA session provided an in-depth look into DefiEdge and its partnership with Unbound. Here’s a recap of the enlightening discussion.
Q. Nischal, please introduce yourself to our listeners and tell us more about your Defi journey.
A: Hello, everyone; I am Nishchal, CMO of DefiEdge. I come from a background in AI. I started working in the DeFi space last year. I have been a part of the Uniswap V3 community even before the testnet was launched. My article on Uniswap V3 also got published in Standford. Last year I met our founder, Tarun Jaswani, and it has been a great journey since then, learning and exploring Uniswap V3.
Q. Can you explain how Uniswap V3 works and how it differs from its previous versions to a naive crypto user?
A: AMMs are the king of DeFi at the moment, and the biggest king is Uniswap V3, with more than 1 trillion in volume. Usually, they make trade feasibility quite easy, and in the earlier version, XY = K, which is a constant product and market maker formula which allows transparent swaps driven by mathematical formulas rather than traditional forms or order book systems. What V3 does is rather than passive liquidity; it allows you to set your ranges more actively and create a concentrated liquidity position which allows more earning fees than just passively equal sharing based on your capital. One thing they introduced was capital efficiency, and the volume it has attracted is huge.
Q. How did the idea for building DefiEdge come about, and what problem of Uniswap V3 are you trying to address? Uniswap V2 didn’t have any optimization mechanism; why is it required for V3?
A: When you put in money, you need a percentage of return on top of it. With optimisation, you understand the market better, and we can find ranges where you want to put more chunking, as the returns are in the ratio to your investment. In V2, the ranges are minus infinity to plus infinity. This results in an imbalance between trading rate and liquidity, creating capital inefficiency. Hence, V3 came with a concept of itself where more specific liquidity is provided with better ranges which allows the opportunity to have capital gain more returns that opened a whole pandora’s box in terms of features.
Q. To quote from your docs, ‘DefiEdge allows anybody to create a strategy’. Would it be possible for anyone to create one?
A: To become a strategy manager, one must understand the DeFi space and the mechanics of Uniswap V3. A strategy manager does require some efficiency and experience, but with Defiedge, the platform gives features that anybody can become a strategy manager. DefiEdge comes at the core of this problem and how we can make strategy management and personal liquidity management very easy. Yes, DefiEdge being a permissionless protocol, anyone can become a strategy manager. But with other protocols, you might require some proficiency.
Q. How does the experience for a strategy manager from providing liquidity directly to the Uniswap V3 pools than providing it through DefiEdge?
A: The mechanics of Uniswap V3 is when you provide a position in Uniswap V3, you get an ERC 721, which is an NFT representing a position, and then you interact with different pools altogether. Then to create ease, a lot of protocols are working into it. For example, there are limit orders & liquidity mining rewards, so there is a scattered experience all over the place that gets confined at Defiedge.
As I mentioned, ERC 721 representations are provided for adding liquidity, and we have made some native changes. We interact directly with the factory smart contract that shells up to 33% of the gas, and then you get DE shares. DE shares represent liquidity in terms of profit and the position assets that you are holding in an ERC 20 form which makes it more leverageable, whereas in the native Uniswap V3 platform, you don’t get these features.
In terms of features themselves, we provide multiple ranges, provide hooks to track your strategy on different platforms, and can have public and private strategies. There are also limit orders enabled. We have also recently partnered with chainlink automation, specifically as a partner on Arbitrum, and soon, we are going live on the Optimism part as well. That allows you to trigger these kinds of liquidity burns and manage your strategy.
I would request the community to try Defiedge as we have got resources in documents to help you understand if you face any obstacle, you can come on discord itself. The community is loving it, giving us a compounding fuel that the more they love it and the more we want to work out.
Q. What are the benefits for liquidity providers at Defiedge?
A: As a Liquidity provider, there are two things they target: they want good returns on capital and the other they should understand the risk natively & third, they should have sufficient actionable features if they want to manage things on their own. So Defiedge itself places itself around some pillars:
- We have multiple ranges available within one strategy, and you can have different efficiency and risk management strategies.
- Liquidity mining rewards are natively enabled on our platform, so the users do not have to collect the rewards elsewhere but on the platform itself.
- They can have private strategy management and automated vaults and links; hence liquidity providers can have more control over liquidity if they wish to manage it themselves.
Because the beauty of Defiedge is it is not a centralized platform, it is a permissionless protocol where anyone can become a strategy manager and liquidity provider who has the huge power to manage himself. It is a little spoiler, but there are use cases where they can use their DE shares for other things also, which is going to compound their yields. Personal strategy management is something we will be pushing in the near future.
Q. Who do you see as your main competitors in the industry, and what sets DefiEdge apart from other Uniswap V3 optimization platforms?
A: We have Gamma and X-token as our competitors, but Defiedge sets itself apart by posing itself as a permissionless protocol and seeks for consumers to come and manage their own strategy and be linked to the community. It is a very community- platform, where community drives the product rather than efficiency to make higher yields. DefiEdge adapts to users’ needs and making it easy to understand and more educative. We are not just a hedge fund but a toolkit which can help you make money. We also believe in cooperation and collaboration rather than competition. Even our competitors can create strategies on our platform, and we’ll be happy to manage them.
Q. With more protocols improvising with V3 like Sushiswap & Trader Joe, how scalable do you think DefiEdge is? and how does it plan to accommodate the growth and advancements in the decentralized exchange (DEX) space?
DefiEdge has seen much growth and advancement in the current version. We have native liquidity mining rewards built in. A great project is driven by great community feedback, and no protocol has cracked that yet because the community is every growing. Even the Defi space must be enabled with more infrastructure and resources. Whatever the need of the users is, that's how we are adaptive, so the current best way is for users are looking for something easy and solid to use, and that's where the focus of DefiEdge is.
For us, it's more about understanding the community, and we have started with Uniswap V3 because the problem is the biggest with the biggest volume. The current motto is to get more user adoption and current market fit rather than building constantly having tons of features. We are more focused on how users like those features and perceive them. Recently, our content has been towards making the features easy, understandable and educational for a user. In this bear market, at least, this is the building phase because volumes are down. When the bull market comes, we will look at what tool can be for adoption, and a protocol always has to adapt to flexibility.
Q. DefiEdge recently won the proposal of Optimism rewards vote on the Uniswap governance. How do you see this affecting the adoption of DefiEdge?
A: I think that’s a testament to the hard work that the DE team has put in. We have recently won awards from Uniswap governance itself. Our team has a huge motivation pump, and we are doing it, and the community is coming back and saying well done. When you make a great product, and the community can’t understand it, there is nothing worse than that and people come and say that it is something great. They love to use it, and this is going to bring a lot of users to us and we are focused on how to retain users once the rewards are over. There is a lot of stickiness to our platform, and we want to maintain that. There are more than 5000 votes on the proposal itself, and I want to congratulate the team, partners, and community this announces in the world space that Defiedge is there.
Q. How do you think the partnership between Unbound and DefiEdge will add value to the decentralized finance (DeFi) ecosystem?
A: Nishchal: The power of compounding is so huge that it’s difficult to perceive sometimes how it will be in the long run. DefiEdge and Unbound have opened the key to compounding, where DefiEdge users can collateralize the shares themselves and get loans based on top of it. They can also put those somewhere for the yields themselves. This compounding effect is the contagious viral effect. The viral factor that DefiEdge was missing, I think that Unbound has opened huge floodgates for us, and we are grateful for the partnership. This partnership takes compounding to a new level, and we are excited for the community to benefit from this.
Ragini: Once you provide liquidity to DE, they allot you DE shares which are in ERC 20 representations of the liquidity. It works like the LP tokens you get after providing liquidity to the Uniswap V2 pool. At Unbound, we will be collateralizing these DE shares, and Unbound is the first one to do that and allowing our users to borrow our native decentralized cross-chain stablecoin, which is UND. So this adds up to an enhanced level of liquidity and brings in overall capital efficiency. Through this partnership, we will be targeting the 4 billion liquidity that V3 has been holding, which is locked in V3.
About Unbound Finance
Unbound Finance is a novel, non-custodial lending platform driven towards enabling newer and better opportunities of yield to improve the overall capital efficiency of the DeFi ecosystem. The platform enables Defi users to borrow over-collateralized synthetic asset loans in the form of UND stablecoin by collateralizing liquidity pool tokens (LP tokens) and concentrated liquidity positions of next-gen AMMs such as Uniswap v3. Through synthetic assets like UND stablecoin, Unbound aims to unlock the liquidity available in DeFi DEXs and to enable the easy flow of this liquidity from one chain to another without actually removing it.
The key highlights of the protocol are as follows:
- Interest-free borrowing: Unbound does not charge any interest on the borrowed UND.
- Perpetual borrowing: At Unbound, borrowers have unlimited maturities. Users can unlock the underlying collateral at any time by simply paying off the outstanding debt.
- Stablecoin UND: UND is the first flagship product of the Unbound protocol. It is a decentralized, cross-chain stablecoin designed to be native to the AMM space.
- Factory Smart Contracts: Unbound uses liquidity lock contracts that are permissionless and support EVM-based AMMs like Uniswap, Balancer, Curve, SushiSwap and the like.
- Collateralizing concentrated liquidity positions: Unbound is one of the first protocols that allows concentrated liquidity positions to be used as collateral for borrowing synthetic crypto assets such as UND stablecoin.