How Unipilot is different from other Automated Liquidity Managers
Note: This is the fourth article of the series “Explaining the Pilot Protocol”. Read the previous article “The Pilot Index Fund”.
The launch of Uniswap v3 introduced a new niche in the market and gave a perfect opportunity for services such as “Liquidity Optimizers” to address it. The release of the “Concentrated Liquidity” feature called for services that can manage the complexities of providing “in range” liquidity on v3 while reaping the rewards of a more profitable protocol.
Today, there are three services that have emerged as front runners in this sector: “Unipilot”, “Visor Finance” and “Lixir Finance”.
We will look at what they offer users and how they differ from each other.
Providing and managing liquidity
Fundamentally, all three services allow users to deposit their liquidity into an automatically optimized Vault / Pool, that generates an NFT for the user representing their share of the pool.
However, there are certain features that differentiate Unipilot from its competitors in terms of giving freedom and convenience to users.
- Its universal and permissionless nature means that anyone can deploy Vaults for any token pair of their choice on the dapp without needing to be whitelisted.
- Users are also able to deposit liquidity with a single asset, with the protocol handling the token pair swap for them. Furthermore, it offers an additional feature of “Index Pools”.
- An Index pool represents a combination of top liquidity pools operating on Uniswap v3. These pools allow users to hold a position in multiple top liquidity pools by market capitalization, simply by depositing their liquidity using a single token. As a result, their risk is hedged and they become a shareholder in all the top liquidity pools.
Optimizing Liquidity price ranges
For users to earn fees their liquidity must sit within the right price range so that it can sustain trades.
Visor finance uses programmable liquidity management strategies. These strategies would either readjust liquidity periodically or with the use of prediction algorithms.
Lixir finance optimizes liquidity by allowing users to add capital to one side as the price moves or by calling it a “Re-pricing” function once it is out of range. Users have rewarded in $LIX tokens for aiding the optimization.
Unipilot uses its efficient smart contract architecture to achieve the best optimization. The “Concentration Incentive” rewards anyone with $PILOT tokens for calling the readjustment function when liquidity ranges deviate from the actual trading price.
These functions are evaluated by the smart contracts using range prediction algorithms and are carried out accordingly.
Initially, open-source bots from the protocol will trigger readjustment functions, which will give users a template to customize their own solutions. Furthermore, the modular architecture of the protocols also allows for the incorporation of different algorithms into the protocol, helping it to stay up to date with new techniques.
Role of the native token
Services usually have a native token that can either be used within the protocol or be given to users as rewards for partaking in it.
Visor finance: $VISR. Users can stake it to receive protocol revenue from the liquidity management. It also enables decentralized governance as users can vote on key aspects such as rewards programs.
Lixir finance: $LIX. It is used to reward users who contribute to the optimization of liquidity. Token holders can also vote on key aspects such as the addition of new pools on the dapp.
Unipilot: $PILOT. It is primarily used as the incentive structure for involving the community with liquidity optimization. Moreover, it also gives users additional options as they can withdraw their earnings in an equivalent dollar amount without facing a withdrawal charge.
$PILOT holders also have a say as they can use it to vote on key aspects such as the percentage of rewards for Captains.
The most significant aspect is that the tokenomics of PILOT is connected to the use of the protocol, the more it is used the more PILOT will rise in value.
How do these services maintain their value?
With Liquidity, optimizers generate income when the users earn fees on their liquidity. All three services have their treasury/foundation holdings locked and vested.
Visor finance sustains the protocol by reinvesting its earnings.
It takes 10% of the reinvested v3 fees and buys VISR on the open market to support its price.
Lixir finance follows a similar pattern as they take a percentage of the fees earned by users to buy LIX on the open market to support the price.
Support from the Index Fund
Unipilot sustains its protocol with a structure that is secure and not reliant on external exchange trading. All the protocol earnings are transferred to the “Index Fund” that will grow and retain its value as the protocol continues to generate fees.
All the tokens it accumulates are locked within it unless $ PILOT tokens are burned to release them. This makes the PILOT token deflationary and helps to keep its value pegged to the Index Fund.
Read more about the Pilot Index Fund.
Additional features of Unipilot
Unipilot also introduces more innovative features that aim to squeeze out all the capital efficiency afforded in V3 and give more access to capital to its users.
The term “Flash Liquidity” coined by the Pilot protocol is a powerful way to provide liquidity and earn a percentage yield as high as 40% daily.
Unlike v3 where liquidity can be allocated at different ranges, Unipilot concentrates all the Vault’s liquidity into a single range which allows users to earn huge amounts in fees, while the asset price remains stable.
More details about this feature will be released in the following article.
Interest free loans
Imagine you have provided liquidity of $100,000 through Unipilot, you are earning a good amount in fees but your capital is locked up.
What if you need some capital to invest in a new token?
Enters VoirUSD, with its integration to Unipilot, it’ll enable users to take out interest-free loans in a stable coin with just a single click.
The users will keep earning their fees and additionally can take out loans.
How cool is that!
More information about this will be released in the upcoming articles.
Read more about VoirStudio.
The most versatile Liquidity Optimizer
Unipilot was built with users in mind to make the experience of providing liquidity as seamless and efficient as possible. By staying up to date with market trends, paying attention to competition, and listening to user demands, Unipilot has managed to combine the best features and strategies to maximize returns on investment. Stay tuned for more articles as we expand on these innovative features.