Monad Weekly Catch Up — Vol 1.1 (Nitro Finance)

As always, this is your One-Stop Monad Alpha Shop catering to:

• Builders
• Alphas

In this episode, I’ll offer a TL;DR on two of the numerous projects currently building on Monad.

Due to the complexity of each, we’ve divided them into two parts. This is ALPHA 1, where we’ll be reviewing Nitro Finance, a leading DeFi protocol on Monad.

ALPHA 1: Nitro Finance

Category: DEX and Money Market

Project Overview

To understand what the Nitro team is building, it’s crucial to recap the core fused trade ledger concepts provided by Nitro — the fusion caters for Liquidity Providers, Traders and Borrowers alike; these utilities includes;

1. Nitro DEX

2. Nitro Liquidity Pools

3. Nitro Money Market

4. Nitro LaunchPad

5. Nitro Point System

Let’s dive into these details:

A. Nitro DEX

Nitro will function as a DEX, enabling swaps between Monad, USDT, and other tokens existing on the Monad Chain.

This mirrors the functionality found on platforms like PancakeSwap, UniSwap, and TraderJoe.

Indeed, we can anticipate that Nitro will emerge as a premier DEX on the Monad Chain, catering to both whales and shrimps alike.

B. Nitro Liquidity Pools

In most AMMs, liquidity providers deposit assets into a pool covering every possible price from 0 to infinity. While this model ensures liquidity for every trade, it often results in inefficient capital usage and exposes providers to impermanent loss due to the significant volatility of crypto assets.

This is where the concept of ‘BIN-Concentrated Liquidity’ utilized by Nitro comes into play.

The BIN approach helped limits the exposure to the desired price range, allowing more efficient capital allocation and a potential for higher returns.

C. Nitro Money Market

Money Markets are on-chain banks — that allows users to borrow and lend cryptocurrencies and other digital assets.

• For Lenders On Nitro Finance: Money Markets give the ability to put inactive Liquidity on BINs/Pools to work by lending out their cryptocurrencies to earn yield and grow their savings.
• For Borrowers: Money Market gives them the opportunity to borrow Liquidity on inactive BINs/Pools and payback with interest after a stipulated time.

Money Markets allow borrowers to take out a short term loan in order to borrow one currency (e.g. ETH), while putting up another currency (e.g. USDT) as collateral.

Note: This collateral is required in the event the borrower fails to pay back their debts, in which case the collateral is sold and the loan amount is sent to the Lender. Otherwise the collateral is returned when the loan is paid off by the borrower.

More Information on BINs is provided in the later part of this article.

As much as I don’t want to bore you with lengthy technical details about Nitro Pools and Nitro Money Markets, it would be fruitless to skip explaining how Nitro’s BIN models (Nitro’s version of Concentrated Liquidity Price Ranges) work.

Introduction To Nitro BINs

In Context: Let us consider Bill who is hoping to supply $10,000 to a X/USDT liquidity pool.

1. For Concentrated. Liquidity Pools

How does it work?

• UniSwap V3 introduced concentrated liquidity; allowing providers like Bill to focus funds within a customizable price range of X/USDT — against General LPs where the funds added to a X/USDT pool, is made to cover 0 to infinity price of X/USDT.
• So, this means on V3 Bill can opt to only supply his $10,000 LP to the X/USDT price range of $125 — $175 and earn fees only within that price range.
• Although IL occurs, when X moves within this range, but it’s confined to that specific range.
• If X falls below $125 or exceeds $175, his LP investment becomes inactive, and he stops earning fees.
• For instance,his investment may reach $5,500 of X and $5,500 of USDT due to the LP on the $125 — $175 price range — but, once he tops earning once it goes out of this range.
• To keep the funds in a spot that lets it earn fees, Bill will need to rebalance the Price Range to suit market conditions — meaning he will need to reduce or increase the range.

2. However with Nitro Pools, the above goes further by a mile to make revenue generation better for LP providers.

How does it work?

• Nitro uses a model similar to the Liquidity Book on Trader Joe (Avalanche); which is another type of Concentrated Liquidity Approach.
• Instead of Price ranges, Liquidity Book uses liquidity bins: a sort of pool within a pool.
• Every BIN corresponds to a specific price level just like price ranges.
• E.g If Bill projects that the. price of X. will range $145-$157, on UniSwap V3 he might pick a price range of X/USDT $125 — $175, but on Nitro BINs; he might be required to select out of BINs like; $136-$164, $135-$159 to … nth — $175 for instance.
• A liquidity provider can decide to provide LP to a BIN or a set of BINs within a price range of a X/USDT pool and earn fees on these BINs.
• Invariably, every bin corresponds to a specific price level (within a pool).
• Bill will keep earning swap fees as long as the price of X ranges between $145-$157 which is within the BINs selected.
• However, he stops earning once price of X/USDT moves out of the BINs his LP is covering, let us say price goes to $142 or $163.
• His LP position will stay inactive until it returns to the BINs range he projected or until he changes the BINs he picked.

Strategies On Nitro Pools For Liquidity Providers

Furthermore, Nitro BIN also uses strategies that exist on a place like TraderJoe, models suxh as Spot, Curve and Bid-Ask trading models; these strategies help maximize returns.

These strategies are explained below:

1. The Spot Strategy: With this model, Bill can decide to allow his LP collect fees from the entire BINs within the price range he has projected.

Context: Bill supplies LP to all BINs within the $145-$157 range of X/USDT and earn as the price moves within the BINs.

2. Curve Strategy: With this model, Bill can decide to supply most of his funds to a specific BIN within a price range, simply because he feels the price of X/USDT will tend to consolidate around that price for a long time.

Context: Bill believes that within the $145-$157 range of X/USDT, the price will consolidate more around $149.5 — $151. Hence he supplies LP to that part alone and earn fees for as long as the price stay around that point; this maximizes his earnings that spreading it like the Spot Model.

3. Bid — Ask Strategy: With this model an LP provider concentrate his fund mainly on both ends of the price range: this is preferable for token pairs with high -ranging — volatility.

Context: Bill believes the market is very volatile and the price of X/USDT will tend to fall rapidly to $130 and rise to $175 often (possibly can be due to pump and dumps or manipulations). So he will now supply his LP to BINs on the ends of the price curves and earn from the volatility in the market.

NOTE: Bill can decide to supply LP to the X/USDT pool and also maximize his position by leveraging on any of the above strategies.

Strategies On Nitro Money Markets For Borrowers

Let us break it down using 2 scenarios:

• Bearish Case

1. Let us assume Bill who holds some USDT and he projects that the price of X will fall below $130. He can decide to go borrow some X on the current BIN.

2. He can also decide to sell it for USDT and wait for price to crash and buy more X, then wait for pump to sell the cheap X he has bought.

3. Then Bill can proceed to repay his loan with interest back into the BIN he took it from.

• Bullish Case

1. Let us assume Bill who holds some X and he projects that the price of X will rise to $175. He can decide to go borrow some USDT on the current BIN.

2. He can also decide to buy more X with the USDT he has borrowed.

3. Then Bill will now wait for price to pump and so he can sell the X with him for USDT.

4. Then Bill can proceed to repay his USDT loan with interest back into the BIN he took it from.

Understanding Nitro BIN Orders

Nitro Pools has also introduced the BIN Limit Order which is likened to a traditional CEX order orders:

Let us discuss how the BIN orders are used on Nitro Pools and also on Nitro Money Markets:

A. BIN Order in the Form of Liquidity Provisioning

How does it work?

1. Take Profit (TP) : With this strategy Bill can pick a profit point on the selected BINs, where the funds within a Liquidity Pool will become inactive and profits so far will be taken — this is when the price move above the BINs or price range selected by Bill.

2. Buy Limits: With this model, Bill can decide the price point that must be reached before his LP becomes active.

His LP can be inactive, but once the price of X close up to a particular BIN, the order will trigger and his LP position will become active.

B. Bin Order in the Form of Borrowing

How does it work?

Via the Nitro Pool and its BIN method, LP providers can earn from trade fees active BINs and also loan out their LP when the BINs are not active.

Let us break it down the scenarios when BIN orders are applicable to the Nitro Money Market;

1. Buy Stop: With this strategy Bill who is hoping to borrow some X, projects that the price of X will rise.

Hence, he pick a Buy Stop point — he is now willing to submit his USDT as collateral and take a X loan from a BIN once the price of X rises and hits a particular point.

2. Stop Loss (SL) : Just like the TP model, the SL model will trigger once price falls below a price range/BIN — this will automatically liquidate Bill Loan position and pay his debts.

Next major utility of the Nitro Finance is;

D. Nitro LaunchPad

Nitro LaunchPad offers a distinct approach that will help enhance token launches on the Monad Ecosystem.

To make this work, it incorporates 3 features;

• Customizable Distributor Curve

The customizable distributor curve will allow projects launching on Nitro LaunchPad and Monad to adjust parameters such as token release schedule, allocation percentages for different participants (e.g., team, advisors, community), and vesting periods; according to their specific needs and goals.

• Efficient Price Discovery

Nitro LaunchPad facilitates efficient price discovery by providing a platform for initial token sales based on the customizable distributor curve.

Investors will be able to participate in token sales with confidence, knowing that the price is determined by a predefined curve rather than speculative market conditions.

This will enhance trust and confidence among investors and ensures a fair and orderly market for the newly launched tokens.

• Liquidity Bootstrapping

Via the liquidity bootstrapping mechanisms, Nitro will ensure adequate liquidity for newly launched token pairs.

Projects can provide initial liquidity to their token pairs using various strategies, such as liquidity mining incentives, liquidity pools, or token swaps.

Additionally, this will prevent high slippage and volatility in the early stages of trading, creating a more stable and liquid market for the newly launched tokens.

So; invariably are you a developer or creator hoping to launch a project — the Nitro Launch Pad could be the best bet you have for a successful main launch.

E. Nitro Point System

The Nitro Points System will incentivizes community engagement and participation within Nitro Finance.

Here is how it will possibly work:

• Community Engagement: Nitro Points will be used to reward members for active participation and contributions.
• Care Package Reserve: The promise of a “care package” reserve will motivate members to earn Nitro Points.

Invariably it will promote and sustain participation and loyalty.

Pen Drops

In conclusion, NitroFinance aims to seamlessly integrate a DEX and money market functionalities within a single protocol. This integration will streamline the user experience, offering a comprehensive DeFi solution that caters to both trading and lending needs on Monad.

By leveraging Monad’s capabilities, NitroFinance will. be characterized by fast transaction speeds, low fees, and enhanced security.

This strategic decision not only ensures interoperability with existing Ethereum-based projects but also opens up avenues for scalability and innovation.

To stay updated on what Nitro Finance is building, I strongly recommends checking out the following community links:

Twitter: https://x.com/nitrofinance

Discord: https://discord.gg/nitrofinance

Whitepaper: https://nitrofinance.xyz/summarydoc

Author

• Since, you’ve made it this far , it is sure you love what you have been reading.
• Then, follow me on Twitter
• Also Like, Retweet and Comment on this Tweet: Monad Weekly Catch Up — Vol 1
• This way, I can keep you updated on all things Monad 💜
• Also click Read the Alpha 2 on the Catch Up Vol 1 on Monadian NFT Collection — Click here.

Once again, thank you.

AkureFirstSon

Discord: akurefirstson

Telegram: akurefirstson