⏳ The Journey So Far ⏳
Lifinity’s story began in May 2021, when it first started building its DEX. Let’s reflect on what has been accomplished since then:
・Built Solana’s first oracle-based DEX using Pyth as the oracle provider
・Bootstrapped DEX liquidity through the Flare NFTs, which sold out in 2 hours, are currently over 4x above mint price, have more than 20% of the supply bought back, and are still backed by all the mint funds and more
・Integrated with Jupiter and quickly rose the ranks to become the most capital efficient DEX and consistently a top 10 DEX by volume across all chains
・First DEX with transparency regarding its pools’ impermanent loss, which is usually reversed into market making profit
・Raised $10M through the veIDO — a novel form of an IDO where participants choose the lock period of the tokens they acquire — with no VCs and most funds raised being used as protocol-owned liquidity in the DEX pools
・Innovative tokenomics with an improved ve mechanism and zero dilution from liquidity mining, resulting in over 80% of the circulating supply of LFNTY being locked as veLFNTY, with the majority locked for the maximum duration of 4 years
・Partnered with projects such as Marinade, Lido, Jito, SolBlaze, UXD, and Bonfida to market make for their tokens
・Continued opening new pools and optimizing existing ones throughout the bear market
・Generated over $20B in volume and over $5M in protocol fees across our lifetime
・For the past 2 years, has distributed half of protocol revenue to locked token holders and used most of the remainder for buybacks and increasing liquidity
While Lifinity will continue market making as it always has, we have decided to expand our horizon by building a new protocol to bootstrap a new market on Solana.
⏳ Introducing Sandglass ⏳
Sandglass is the first pool-based yield trading protocol on Solana. It splits yield-bearing tokens into their principal and yield components and enables each to be traded separately.
What problem is Sandglass solving? If you want to express a market view on a token based on its price and yield, your options are currently limited to:
・Price ⬆️, yield ⬆️
・Price ⬇️, yield ⬇️
For example, if you buy SOL and stake it, you have positive exposure to both its price and yield. And if you think the price and yield will decrease, you can sell or short staked SOL. So the only bets you can make are that price and yield will go up or down together.
By disentangling price from yield, Sandglass enables two more views to be expressed:
・Price ⬆️, yield ⬇️
・Price ⬇️, yield ⬆️
In other words, you can bet on price and yield moving in opposite directions. When would this occur? While there can be any number of reasons for price and yield to diverge, here are two examples:
- Recently, the SOL price ran up very quickly. If the many SOL buyers took their newly acquired SOL and deposited it into liquid staking protocols such as Marinade, Jito, and SolBlaze, the total amount of SOL staked would increase, which in turn would decrease staking APYs. A yield trader could profit from this by converting their SOL yield exposure to price exposure before SOL price mooned.
- Suppose the market comes out of a low volatility period by crashing hard. This would result in veLFNTY (Lifinity’s revenue-sharing token) having a lower price but greater yield, since Lifinity’s DEX revenue is largely a function of market volatility (regardless of direction). By converting price exposure to yield exposure (or just buying yield exposure with USDC) before the crash, a yield trader would have done better than just holding veLFNTY (or USDC).
To be more precise, Sandglass also enables more nuanced versions of the currently expressible views:
・Price ⬆️, yield ⬆️⬆️
・Price ⬆️⬆️, yield ⬆️
・Price ⬇️, yield ⬇️⬇️
・Price ⬇️⬇️, yield ⬇️
In these cases, while price and yield move in the same direction, one moves more than the other. So yield traders can still profit by converting one to the other.
The big picture takeaway is this: all that is required for a profitable opportunity to arise is for a token’s price and yield to move out of sync. And it is rare for the two to be perfectly correlated, so there are many such opportunities!
Here are some tokens whose yield has the potential to be traded:
・LSTs such as mSOL, JitoSOL, and bSOL
・veLFNTY (Lifinity’s revenue-sharing token)
・Perps LP tokens such as JLP, DLP, and FLP
・LP tokens from vaults such as Kamino, Hawksight, and Tulip
・LP tokens from stableswaps such as Meteora and Saber
・Yield-bearing stablecoins such as USDH, YBX, and SUSD
・Tokens with staking yield such as RAY, STEP, and GOFX
・Bribing yield from tokens such as veMNDE, veBLZE, and veSBR
・Deposit receipt tokens from lending protocols such as Kamino, Solend, and mrgn
Undoubtedly, there will be many more in the future.
We talked about what Sandglass enables yield traders to do, but they would not be able to trade without LPs. Sandglass creates an opportunity for LPs to earn additional yield on their already yield-bearing assets. By passively providing liquidity using just a single token, LPs continue earning the token’s underlying yield while also generating trading fees. What used to be idle assets in your wallet are transformed into assets with two sources of yield!
We will go into the details of how Sandglass enables trading and liquidity provision for yield in a future post. For now, let’s consider…
⏳ The Opportunity ⏳
Taking a step back from crypto, the yield derivatives market in TradFi is worth hundreds of trillions of dollars. This is orders of magnitude larger than the entire crypto market cap!
The main yield trading protocol in crypto right now is Pendle on Ethereum, which currently has a TVL of nearly $5B and a daily volume of around $200M. Given its much smaller size compared to TradFi and how new markets are constantly being added, we believe there is still ample room for growth and that the same holds true for yield trading on Solana.
When Lifinity joined Solana’s DeFi ecosystem, it took a share of the existing spot market while also growing it by bringing arbitrage trades that were previously only possible via CEXs onto the chain.
Sandglass is different. It will be pioneering a totally new market on Solana, as there currently is no yield trading market. This will require an approach that is different from Lifinity’s, but given our experience, reputation, funding (from the Lifinity’s token holders), protocol-owned liquidity, and vibrant community, we are confident that we have what it takes to make yield trading on Solana a reality.
In our next article, we’ll explore the inner workings of Sandglass and how it enables yield to be traded. We plan to launch our app soon after. In the meantime, you can begin thinking about how you want to trade yield.
To stay up to date, follow us on Twitter and join our Discord!
Twitter: https://twitter.com/sandglass_so
Discord: https://discord.gg/7x79v6a6bG
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