While Uniswap’s highly acclaimed v3 has soared to the top of the TVL charts lately, the need for active management has kept some retailers out of their pools – an issue a new product on the Gelato Network is set to address.
The Gelato Network, which was teased for the first time in a community call last week, today published the details of its Uniswap v3 management system “G-UNI”. G-UNI aims to constantly maintain a liquidity margin of 5-10% within the current price of an asset pair, with an oracle network reviewing the prices and rebalancing the liquidity pool position ranges every half hour. G-UNI also automatically reinvests trading fees to compound returns.
“Passive G-UNIs work by simply providing very broad liquidity, similar to Uniswap v2 that never needs to be changed,” said an announcement blog post. “It can therefore be completely free from anyone’s control as it does not require any changes in its price range.”
While Uniswap v3 allows liquidity providers to earn more fees by concentrating their funds at certain prices, it puts them at risk of temporary loss if the trading pair’s prices move beyond the bandwidth set by the provider.
Update: REKT ☠️ https://t.co/0MF0gCd9sm
– ameen.eth (@ameensol) May 29, 2021
The blog post points out that G-UNI’s automatic rebalancing brings the benefits of concentrated liquidity, but with the ability to passively manage the position in a way that is closer to Uniswap v2.
“The benefit of this is that users can sit back and relax as all of the difficulties associated with monitoring LP positions are eliminated.”
Compostability and Incentives
While the new tool will be a boon for passive liquidity providers, the real benefits of G-UNI for other DeFi protocols could be.
A self-proclaimed “legendary member” of Gelato, Hilmar, noted that projects can now incentivize concentrated liquidity in “Pool 2” liquidity pools. Pool 2 is a slang for a native governance asset paired with a popular base asset such as ETH or MATIC.
3) Having an ERC20 wrapper around Uni V3 LP positions is extremely powerful as it allows teams like Instadapp to offer liquidity mining incentive programs in addition to G-UNI.
That means you can now incentivize your community to provide liquidity in specific areas
– Hilmar X 冰淇淋 团队 (@hilmarxo) June 16, 2021
Projects often need to provide sufficient liquidity mining incentives to the participants in Pool 2s, as liquidity providers run the risk of the price of the native governance token collapsing. Concentrated liquidity premiums can help stabilize the prices of domestic assets in a more regular area.
In addition, G-UNI is an ERC-20 token as opposed to an NFT, which opens it up to a wider number of possible uses in DeFi. Many lending platforms accept liquidity pool tokens as collateral, but are not yet largely prepared for positions that are presented as NFTs. G-UNI will enable you to integrate v3 liquidity positions faster. Yield vaults such as Yearn.Finance, which has been planning to incorporate stock market positions for a long time, should find the integration of ERC-20 easier.
G-UNI has been used from the start as part of the introduction of the governance token by Instadapp. The team provides 1,000,000 INST tokens for INST / ETH liquidity mining, with 3/4 of the rewards targeting a higher INST price liquidity range.
According to the Instadapp dashboard, the incentive pools are currently live and offer 2,200% and 1,800% APY, respectively.