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Peanut: Increase the income of liquidity providers through DeFi smart contracts | Project Introduction

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Make slippage a benefit for users.

Original title: "Introduction to Peanut Peanut Project｜Increasing liquidity provider income through DeFi smart contracts"

Original source: Peanut

Deficits of DeFi

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Uniswap Liquidity Providers (LPs) pool paired assets (e.g. equally weighted ETH and USDT) and thereby earn a cut of all fees for token swaps . Currently, the commission paid to LPs is 0.3%. Providing liquidity may sound like an easy way to make money, but it comes with certain risks.

Every time a trader uses an AMM to exchange tokens, the tokens in the pool Coin prices will change. This will affect the value of all LP's assets in the pool. LPs tend to suffer impermanent loss (IL) when the price of a token in the pool spikes or crashes (which happens quite often). When they go to withdraw assets from the pool, the value of the assets held decreases.

The threat of impermanent loss has put all but the biggest cryptocurrencies Trading in liquid pools becomes high-risk business. While an LP can easily make a 0.3% profit on each exchange, the IL's losses can easily outweigh this profit. Additionally, since each DEX transaction affects the price of assets in the pool, it briefly desynchronizes the price of the DEX with the price of the CEX and other DEXs. This leads to arbitrage behavior, with savvy traders scrambling to profit from these price differences.

On-chain "arbitrageurs" put their tx is included in the first block to preemptively run large DEX orders. This is great for sophisticated traders who know how to profit from such opportunities, but not for the average user or liquidity provider. Until these issues are addressed, the value proposition of decentralized exchanges is severely weakened.

"Slippage exists for users to Great inconvenience, and can sometimes pose a significant risk to DEX. Peanut Peanut provides a good solution to this problem. By pooling only 10% of user funds (cross-exchange arbitrage), Peanut Peanut manages to significantly Improve the efficiency of the exchange mechanism and return to users,” said Michael Egorov, founder and CEO of Curve.

What the encryption market needs is a DEX framework that can Enables trustless trading and incentivizes liquidity pools without exposing participants to price risk and potential losses. But, until now, a solution to this problem has been elusive.

Peanut, an advanced price balancing tool

In order to solve the inherent problems of DEX, we have developed an advanced price balance tool Peanut. Peanut was developed by Remme, one of the most accomplished and experienced teams in the field of cryptography, who started research in this area several years ago.

Peanut is a set of smart contracts that can be Automatically balance prices, helping LPs earn more and reduce slippage without manual intervention. Advantages of Peanut include:

Increased passive income Reduced risk of impermanent losses Reduced slippage rewards Governance tokens No manual operations required: Peanut does it all automatically

How it works

The current Uniswap model requires LPs to provide 100% of the assets they wish to combine in a single transaction, and pair Each token is weighted 50/50. Once LPs provide these assets to Uniswap's liquidity pool, they will be at the mercy of IL and are particularly prone to generating large buy and sell orders, which can change market prices.

Using Peanut, 90% of LP liquidity flows directly into the Uniswap pool . The remaining 10% goes to the Peanut protocol to act as a price balancer. Just as a peanut consists of two edible parts (aka cotyledons), a Peanut divides the LP asset into two parts:

< p>90% is used to provide liquidity on Uniswap or via another DEX (in paired tokens).

10% for automatic multi-level price balancing between Uniswap, other DEXs, and CEXs.

Part 2 pools are used in two tiers, providing lightning fast trading operations to keep prices balanced:

Level 1 — ETH account for on-chain operations on DEX

Level 2—CEX account that can buy and sell tokens

When a large buy or sell order is placed, the Peanut pool will automatically conduct corresponding transactions on two levels (ie other DEX and CEX) at the same time. After the transaction operation is completed, Peanut Peanut will liquidate the earned income.

This means that by matching on the CEX, any potential price movement from large DEX trades is immediately dampened, preventing LPs from experiencing slippage.

Liquidity providers can withdraw from Peanut at any time Assets are withdrawn from the system, just like in Uniswap. In this way, LP can not only enjoy all the benefits of providing liquidity, earn 0.3% handling fee, but also reduce the risk of impermanent losses.

Peanut is a breakthrough in AMM because this system combines DEX and Advantages of CEX. It enables trustless token exchange and revenue sharing, while greatly reducing the risk of impermanent losses and front-running.