DeFi LPs Turn To Liquidity Managers To Tackle Uniswap V3 Complexity
Projects Like Arrakis, Gamma and Maverick Offer Automated Investment Strategies For Retail Investors
By: Jeremy Nation •DeFi News
With the widespread adoption of Uniswap V3, the latest iteration of the leading decentralized exchange, the landscape of DeFi liquidity management underwent a radical shift.
Uniswap V3 offers vastly improved capital efficiency but also introduced mechanisms that require liquidity providers (LPs) to constantly rebalance their assets to optimize fee earnings.
As LPs rebalance, any impermanent loss they face becomes permanent when assets shift to new trading ranges. Further, the transactions for rebalancing often cost significant amounts in gas fees, particularly on Ethereum, often unaffordable for retail investors.
Protocols that provide liquidity management on Uniswap V3 are now catering to a growing market of users seeking a simpler means to interact with the DEX and maintain an edge in the DeFi market.
One such option for traders is Maverick Protocol, a dynamic distribution automated market maker (AMM) that recently deployed its platform on Base, Coinbase’s Layer 2 network.
Maverick enables users to efficiently deploy capital into DeFi markets with easily understood strategies, such as mode right which trades strategically to benefit as an asset’s price increases, mode left which does the same as an asset decreases in value, or mode static which optimizes trading for sideways price movement.
With Maverick’s launch on Base, users can now harness the protocol to optimize capital efficiency, use Maverick’s surgical liquidity incentivization tool, and earn additional rewards with the veMAV governance token.
Competing For Supremacy
Maverick isn’t alone when it comes to managing liquidity. In fact, the protocol is still catching up with Gamma, which launched two years ago and now has $77M in TVL after a resurgence in 2023.
However, despite this year’s growth for both projects, Maverick and Gamma are still dwarfed by liquidity manager Arrakis. Even though it’s down 90% from a peak TVL of $1.8B in July 2022, the protocol still currently maintains $186M TVL across its V1 and V2 deployments.
AMM For cbETH
Maverick CTO Bob Baxley told The Defiant he looks forward to onboarding what he estimates to be 100M users on Base to the DeFi ecosystem, saying that “Base clearly has all their ducks in a row.”
On Base, a good deal of liquidity is locked up in Coinbase Wrapped ETH (cbETH), the exchange’s LST, which Maverick is optimized for, according to Baxley.
“We think of Maverick as the LST AMM,” said Baxley, adding that Maverick is ”great for stablecoins as well because you can replicate any AMM curve on Maverick.”
But there are some things that can only be done on Maverick, according to Baxley, such as follow-up prices in liquidity pairs, which helps with less volatile pairs including stablecoins and LSTs.
Maverick’s cbETH pool on Base “is already doing more than 100% capital efficiency,” said Baxley.