Private Pools Network: Harnessing Volatility with Capital Efficient Crypto Indexes and Private Order Flow
Introducing the Private Pools Network
Democratization, innovation, and ingenuity remain core pursuits for developers and enthusiasts in the decentralized finance space. Unfortunately, for the past few years, this drive and ambition have stagnated somewhat. Forks and copycats of the “status quo” have remained the incumbent approach to development. While this form of development has its place, it fails to truly focus on solving core issues within the ecosystem. That said, we are excited to introduce the Private Pools Network (PPN), a pioneering project designed to extract value from market volatility by optimizing liquidity order flow and making these opportunities accessible to the wider web3 community. This, in turn, seeks to address the lingering issues of impermanent loss and toxic order flow.
Addressing Key Problems in DeFi
Private Pools Network aims to solve four significant problems in DeFi:
Inefficient Liquidity Provision
Traditional liquidity providers (LPs) often fail to maximize returns, suffering from impermanent loss as external arbitrageurs exploit market volatility. Majority of APR depicted in traditional liquidity pools isn’t real yield, rather it is disguised with emissions incentives of a token with an unsustainable inflation rate leading to a negative flywheel of perpetual inflation to sustain APR.
Failure to Benefit from Volatility
LPs typically do not benefit directly from the value extracted during arbitrage, which instead goes to arbitrageurs and validators. Yes they collect menial swap fees from artificial order flow, but this is a fraction of the value that toxic flow, impermanent loss and arbitrage detract from LP’s. Were here to change that!
Inefficiency in Arbitrage
The current public order flow model for extracting value from volatility leads to bidding wars and inflated gas prices, where validators capture the lion’s share of arbitrage profits. A recent case study we put out on X is a perfect example of this problem and the magnitude that it impacts the market.
Failed Attempts to Introduce Indexes to DeFi
Indexes make up $11 Trillion dollars of value in the US market alone, yet previous attempts to deliver sustainable indexes to DeFi have failed, mainly due to the fact that their exposure to toxic flow and impermanent loss outweighs the benefit of swap fees. We change this by monetizing the negative effects of liquidity provision, harnessing the yield we extract, to compound and grow our Indexes unitary value.
As a liquidity provider, you’re under attack from multiple fronts without even realizing it. This issue arises from unsustainable liquidity incentives, where protocols depend on foundation grants or high token emission rates (which devalue tokens) to artificially boost APRs from minimal swap fees. While you’re preoccupied farming a token at 200% APR — which will eventually plummet due to inflation metrics — your blue-chip liquidity is being eroded by toxic order flow, impermanent loss, and arbitrage. This situation is neither fair nor sustainable. Fortunately, we have a solution.
Our Solution: Privatized Order Flow
Private Pools Network addresses these issues by introducing Private Index Pools (PIPs). These pools allow for the establishment of private order flow via our automated trading engine, allowing LPs to engage directly in arbitrage of external liquidity sources, while compounding majority of the extracted value.
Private order flow restricts liquidity pool interactions exclusively to the network’s trading engine. Unlike public DeFi models, this closed-loop system eliminates external competition and reduces inefficiencies like Priority Gas Auctions (PGAs). This approach optimizes yield extraction from market volatility, protecting liquidity providers from impermanent loss and toxic order flow, and maximizing ecosystem profitability and sustainability.
Here’s how we capitalize on these problems:
- Private Index Pools (PIP’s): Inspired by traditional “Dark Pools,” where order-flow is privatized to protect the market from sizeable volume of institutional traders, our PIPs democratize access to privatized order flow for the purpose of optimizing the incumbent arbitrage process.
- Optimized Arbitrage: By privatizing order flow, we mitigate the inefficiencies of Priority Gas Auctions (PGAs), ensuring a larger share of arbitrage profits goes to our LPs rather than validators. The incumbent approach sees 80% of value extracted from LPs going directly to validators — no more wastage!
- Market Stabilization: Our approach promotes efficient price discovery and market stability, benefiting the broader crypto ecosystem.
Our Unique Approach to Indexes
Private Pools offers a novel approach to crypto indexes by providing structured exposure to specific market segments within web3, rather than random assortments of tokens. While there will still be some random assortments and the ability for users to create their own indexes further down the line, our novel approach, unlike traditional crypto indexes, is designed to mirror the structure and intent of conventional indexes like the QQQ, offering targeted investment opportunities in defined sectors.
We are introducing sector-specific indexes such as but not limited to:
- L1 Sector Index
- AI Index
- RWA Index
- DePIN Index
- BlueChip Index
- DeFi Index
- Meme Coin Index (for the degens)
This product suite aims to cater to all levels of risk tolerance for people who want diversified sector exposure. This strategic segmentation allows investors to gain diversified exposure to different areas of the market while also capitalizing on potential returns within these segments based on the volatility they experience.
The $PPN Token and Its Utility
The $PPN token is the cornerstone of our ecosystem, serving as an Arbitrage Yield Bearing Token. By staking $PPN, users gain access to 10% of the protocol’s entire yield, offering a unique way to profit from arbitrage without requiring exposure to the underlying assets. Post-TGE, the $PPN token can be acquired through direct purchase or by providing liquidity to our network’s indexes. There are additional flywheels and positive feedback loops baked into our token and its role within our ecosystem, leveraging the design of the token, with the architecture of our network to strengthen one-another, however these nuances will be detailed more thoroughly in our project docs which we will release closer to launch.
Exciting Community Engagement and Airdrop
As we gear up for our main net deployment, we have a series of exciting community engagements planned. These include:
- The launch of our Telegram Mini App (points farming campaign)
- Competitions
- Educational quests on Galxe
and other interactive activities, culminating in an airdrop for our early, active & engaged community members.
Join us to participate in these events and be early to experience the new and emerging DeFi primitive that is Private Pools Network.
In the coming weeks, we will delve deeper into the issues highlighted, providing detailed insights into our market opportunities and the significant value potential we offer to our users.
Stay Connected
To stay updated on our progress and upcoming events, follow us on Twitter, subscribe to our Medium, and join our Discord when it is announced. Be an early participant to unlock unique benefits and rewards as we deploy Private Pools Network.
Join us in transforming the way value is extracted from volatility and experience the next level of decentralized finance with Private Pools Network.
Make sure to follow our twitter for more updates.
Cheers,
Private Pools Network
