Will the "Single Repository Model" be the next DeFi economic model to improve transient losses and gas efficiency

原文标题：《单资金库模型——乐高的基座》

By Jacob Goh and Bailey Tan

Original source: deribit, insights 

0xCC beats BlockBeats

  Dex's growth has been driven by innovations in the AMM space in recent months.

Uniswap V3 引入了集中流动性，与 V2 相比，其资产效率提高了 4000 倍，而 Bancor V2.1 推出了一个有趣的代币经济规则模型，来应对 无常损失的痛处，令单边流动性的提供成为可能。其他 DEX 则在多方面进行创新，单资金库模型（Single Vault Model）被越来越多的采用。

Bentobox from Sushiswap and Balancer V2

In March 2021, Sushiswap unveiled its single-repository model, the Bentobox, as a kind of decentralized app store. All users can store their tokens in a single box that can be accessed from different apps. For example, the assets in the bento box could be mined on Onsen while providing flash loans, or even (in the future) providing liquidity on Sushiswap's AMM.

Similarly, Balancer launched its own single fund during the release of its V2. Balancer's contract pool pools all the tokens offered by the Balancer pool into a single, centralized fund. The logic of AMM is separate from the management and billing activities of tokens. Token management and bookkeeping are handled by the pool, and the AMM logic is quite different for each pool.

Lego base

A single vault can be thought of as a Lego pedestal on which other Lego blocks (different Defi applications) can be built. While protocols like Uniswap focus on building a single building block, others like Sushiswap and Balancer take a different approach -- combining multiple building blocks.

This base can safely store tokens and automatically generate profits through underutilized assets, reducing opportunity costs. Developers can build directly on top of this base, and its decentralized applications (DApps) can connect to the underlying assets and attract more users, thereby increasing the overall utilization of contracts.

The DEX approach is to maximize asset efficiency and profitability for liquidity providers. In this article, we will attempt to explain how the single-pool model is optimized for this purpose.

The benefits of the single pool model

Gas efficiency improvements

Omasake, the core front end developer at Sushiswap, describes the bento box asa Layer 1.5 solution, where everything is put into the same vault." The Single Vault ensures a gas efficient infrastructure by reducing unnecessary token transfers by allowing the holding of tokens balances within the Vault."

Today, multiple approvals for the same coin waste a lot of gas. In a single fund, this cannot happen. Once a token is approved for use in the Vault, it can be used for all contracts constructed on the Vault.

Previously, the increase in gas costs due to the complexity of smart order routing algorithms far outweighed the potential savings from the impact of low prices. The new model completely solves this problem, making the price more appropriate.

With Balancer's new Vault, transactions are not restricted by multiple pools, and only in the final stage of the transaction will net tokens be settled between the Vault, which will result in significant gas savings for users.

High-frequency traders can also avoid Posting any ERC20 trades for short-term positions, which is particularly useful for Dex aggregators.

In addition, through flash lending, arbitrageurs can arbitrage between pools without holding tokens, improving process efficiency and reducing capital-intensive operations.

In general, developers can build dApps without considering their own gas optimization costs, while traders are more likely to trade on these platforms because gas costs eat up less of their profits.

Other applications built on a secure and flexible foundation

The single pool model decouples the AMM logic of the pool from token management and billing, providing a solid foundation for developers. Some details can be delegated to the bank to reduce technology costs. This modular architecture enables the team to become more focused and efficient.

SushiSwap

The first dApp on Bentobox was Kashi, which used Bentobox assets for borrowing and one-click leveraged transactions. Since all tokens are stored in a central vault, it can reduce the number of internal token transactions and overall gas fees. Through Bentobox and Kashi, it is possible to short a single trade or one times leverage.

Miso (Minimal Initial Sushiswap Offering) was also built on Bentobox. Miso is a startup platform for founders to launch new projects in Sushiswap. Miso created a set of smart contracts to make it easy for non-technical people to launch new tokens and migrate them to Sushiswap by enabling mobility. The functions of smart contracts include: creating new tokens for projects, locking up positions, issuing and crowdfunding new tokens, mining farms for new tokens, etc.

Balancer

Balancer's token pool can now serve as a launchpad for different AMM strategies and dApp innovations. We have two official partners:

Element Finance: A fixed interest agreement that builds a custom trading curve on Balancer V2 to avoid the hassle of building an AMM from scratch or the technical overhead of a fork.

"Element Finance needed to implement a custom trading curve, but didn't want to have the technical overhead of forking or building its own AMM. To avoid these issues, we chose to build on top of the Balancer V2." -- Element Finance, April 2021

Balancer-Gnosis-Protocol: Balancer has partnered with Gnosis to bring Gnosis's Dex aggregator and volume auction to market with the aim of reducing the extractable value of miners.

Both Bentobox's and Balancer's repositories will allow dApps integrated into the repositories to relate to each other, creating synergies and network effects between dApps. At the same time, dApps bring new users to the Vault, allowing TVL and contracts to grow.

The efficiency of capital

The pool has full control over the tokens added to the vault. This improves capital efficiency by design, allowing asset managers and dApps to be built on top of a vault of funds. After being nominated by the pool, the pool can play a role by using the underlying tokens, such as for voting, farming, lending money, etc.

SushiSwap

Bentobox's assets can be used to provide flash loans, even if the same tokens are also farmed at Onsen. Even if the assets are not lent out, users can still use their tokens to earn income or LP fees. This maximizes the user's revenue at any point in time.

Kashi's target utilization rate is between 70% and 80%. This utilization is defined as the percentage of assets currently borrowed as a percentage of total supply. It will attempt to do so through an elastic interest rate that fluctuates according to utilization.

Balancer

Similar to Bentobox, assets in Balancer's pool can also be used for flash loans. In addition, Balancer's first Balancer V2 asset manager, built in partnership with AVE, enables idle assets in the V2 pool to earn AVE.

This picture describes the fact that most assets sit idle in a liquidity pool when only a small fraction of the assets are traded.

As the ratio of assets in the pool becomes more lopsided over time, big deals can fail. When this happens, the asset manager will automatically replenish the pool with DAI and send more WETH to AAVE to maximize production.

Currently, only a small percentage of TVL has been successful in AMM. We expect liquidity utilisation measures (as a percentage of income generating assets) to increase substantially as asset managers are implemented in single pools.

Disadvantages of the single pool model

When all assets are in one pool, the risk of smart contracts increases due to the complexity of the system. Although both Balancer and Sushiswap's teams have done a lot of work on the security of their money, this innovation represents risk to some extent.

In particular, dApps and asset managers have a lot of authority over the assets of the repository and should carefully review the complex logic involved.

The road ahead and the vision

"Bentobox's innovation lies in its extensible design. Its vector-based design allows Bentobox to be the future DEFI infrastructure on Sushiswap. It creates a major source of liquidity that can be accessed by any user with minimal approvals, minimal gas consumption and maximum capital efficiency." -- Sushiswap, May 2021

In addition to the various benefits from the pool of funds, an important factor to consider is that it creates a moat of competition for the integration protocol. In DEFI, this advantage is difficult to achieve because of the complexity of the protocol, which makes it nearly impossible to fork and copy.

Imagine that Yearn and Sushiswap are in the same vault. The combination of these protocols becomes an entry point to generate sustained revenue from user funds participating in DEFI. This will also increase the market barriers to prevent other upcoming Dex from eroding the market share of Sushiswap and Balancer.

In this transition, it can be seen that Sushiswap and Balancer are targeting passive liquidity providers as a result of the large influx of active liquidity providers into Uniswap V3. Sushiswap and Balancer are good choices for retail liquidity providers who want to manage their liquidity passively, while Uniswap will offer a more active strategy to attract more sophisticated investors. If the single repository model fulfills its vision as a passive liquidity provider, then it is not surprising that assets will migrate on a large scale.

1. Defi castle built by money Lego

Using the Lego analogy, Sushiswap and Balancer see AMM as a Lego component on an ecosystem. Taking a page from Polygon and actively incentivizing established Defi protocols such as AVE and Curve to deploy on L2, the next step is to incentivize more other Lego blocks to build on top of the Lego base -- and fill the base with tons of Legos.

Over time, the structure can become more complex through cooperative integration, achieving an insurmountable moat for Sushiswap and Balancer. The Lego base will be a solid foundation on which to build Defi Castle.

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