Today, we’re excited to announce that Enzyme now enables you to build and actively manage Uniswap v3 strategies. For active liquidity managers, this offers an easy platform to monitor and manage your liquidity strategies whilst allowing third parties to tag along in exchange for a fee. For passive LP’s, this provides a way to improve returns without having to dedicate the time or energy into understanding or actively managing positions.
In May last year, Uniswap v3 introduced the tools to minimize impermanent loss through the ability to concentrate liquidity across different ranges, thus making your liquidity provision much more capital efficient. Interestingly, you can also adapt the commission fee per pool according to the characteristics of the pool you’re creating which can protect you further on volatile and illiquid pairs.
Unfortunately, though, most of Uniswap’s users are still opting for the easy, less efficient way of managing their liquidity passively by setting an infinite range for their liquidity so that they can essentially ‘set and forget’. This approach is a lot less capital efficient and likely to stack up losses (rather than gains) but it is popular because it requires less time and effort to manage.
The Benefits of Strategy Management on Enzyme
With Enzyme, managers can create their own vaults to manage strategies. The protocol provides a simple interface which enables vault creators to customize and configure rules around vault ticker, deposits, redemptions, shares transferability, fees and risk management policies designed to protect depositors into the strategy.
So by managing a Uniswap v3 strategy out of a vault, you have the following advantages:
- Plug and play: Projects like Charm, Visor, Arrankis, Mellow and others have all built their own smart-contract to manage their strategies. They constantly have to worry about security, maintenance and how to govern these contracts which is a huge time and money sink. With Enzyme, strategy builders can plug into Enzyme and build their strategies today whilst outsourcing past, current and future development needs to the enzyme ecosystem.
- Historical & Real-Time P&L Tracking: Keep track of performance over time and make it available to everyone to see in real-time through a dedicated link.
- Scale via enabling LP’s to deposit to your vault: Leverage the ability to be able to accept deposits from 3rd parties and manage liquidity non-custodially on their behalf.
- Monetize via Fees: Earn fees for the service you provide by embedding fees into your vault contracts (choose from management, performance, entrance or exit fees).
- Share the gas fees of active management: as it is spread amongst all LP’s
- Composability: No need to limit your v3 liquidity strategy to just Uniswap. Utilize the composability of Enzyme with other DeFi protocols to build something more innovative and performative into your strategy.
- Automate: Leverage our SDK to automate your strategy.
- White-label: Maybe you want to build a strategy but label it and brand it as your own? Fair enough. This is why we’ve been developing a white-label solution for projects that want to host their own interface but use Enzyme’s back end to manage deposits and withdrawals. Contact us if you’d like to get on the waiting list for this new feature as we’ll be rolling it out in phases!
So how does it work?
Here’s a video we recorded to give you a quick run through of Enzyme and how Uniswap can work from a manager’s perspective within an enzyme vault.
Why Delegate Liquidity to Someone Else?
With Enzyme, the process of providing liquidity efficiently can be massively simplified by delegating to teams or individuals with the right skill sets or track records.
The advantages of delegation by depositing liquidity into an actively managed Enzyme vault are as follows:
- Improve returns: Maximise the capital efficiency of your liquidity by concentrating liquidity smartly across different ranges and pricing the pools in order to maximise returns.
- Simplicity: Save time and stop worrying about determining the right price ranges, actively monitoring them or trading in and out to appropriately lock in profits or initiate new positions.
- Gas Costs: Share alongside others in the gas costs incurred through actively managing strategies (it is expensive to create and withdraw from pools on Ethereum!).
- Transparency: Full on-chain view of what is happening inside a vault at all times through an easy and intuitive dashboard.
- Live P&L tracking: Full performance metrics (both current and historical).
- Risk Management: When used as intended, Enzyme’s contracts prevent managers from being able to abuse investors and/or run off with their funds. It is important to check the vault configurations before allocating to any strategy.
Other Use Cases
1. DAO Treasury Management: DAOs that want to actively manage liquidity in their own token can deposit liquidity into an Enzyme vault to capitalise on this use case. Then, trading can be delegated to a trusted member of a DAO’s community to actively manage assets in a secure and transparent way with full-time reporting to all stakeholders. The DAO will still retain ownership and funds will not be removable from the vault and can only interact with the protocols the DAO specifies permission for.
2. CeFi Funds doing DeFi: It’s difficult for CeFi funds to manage liquidity across multiple pools and protocols while aggregating positions, assessing P&L and accessing reporting in one simple, easy-to-use interface. With Enzyme, you can dedicate a vault to your AMM activities in DeFi and have one token and a value attached to that.
As you can see, Enzyme’s Uniswap v3 integration opens up a new window of possibility for both active liquidity managers and passive LP’s. This provides a more sophisticated way to maximise capital efficiencies while reducing the time and effort needed to manage these strategies.
We look forward to seeing our users build out and actively manage Uniswap v3 strategies!
At Avantgarde Finance, we’re excited to help a range of clients launch their own DeFi strategies with Enzyme.
Here’s a quick summary of how we can help:
DAO’s: Avantgarde helps you manage your crypto balance sheet in a safe and transparent manner while still taking full advantage of the rapid pace of innovation and iteration of new financial primitives.
Treasury Management: Give us a mandate and we will help you earn yield transparently and in line with your DeFi philosophy and investment policies.
Asset Managers: From investor management to strategy automation, Avantgarde provides tools and services to optimize your on-chain asset management experience.
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