Gamma’s Immediate Road Map — Audits, Strategies, New Liquidity Venues and Market Making
After almost one year since Uniswap v3 launched we have seen significant growth amounting to $775B in volume and $4.45B in TVL which has brought significant demand for active liquidity managers. As the first active liquidity manager for Uniswap v3 positions we have had close to a year of significant experience both innovating and reacting to the challenges of managing liquidity. However, there is still much more to be developed in the Discretionary DeFi space, which is predicated on generating returns not through hyperinflationary emissions of assets but through market based directional strategies.
In this road map we layout the developments we are working on at Gamma to further develop our protocol and contributions to Discretionary DeFi. In the pursuit to provide a complete solution to LP’s, projects, managers and market makers we are working on everything from new strategies to a secure framework for execution and automation.
In this article we will be detailing our roadmap for what Gamma plans to build during the first half of 2022, which includes the following:
- Audits for all Gamma Smart Contracts
- L2 Deployment on Polygon, Optimism & Arbitrum
- Analytics and UI
- Collateralization of xGAMMA and LP Positions
- Partnership Integrations with Tokemak, Olympus Pro, and KeeperDAO
- New Strategies & Protocol Features
- Gamma Pro
Audits for all Gamma Smart Contracts
Our audit with Arbitrary Execution began on January 14th, and we are expecting an initial report in the first week of February, with a final report due the second week of February. Additionally, our audit with ConsenSys Diligence began on January 31st, which will cover all our smart contracts in production and includes our controller contract for Tokemak liquidity direction. We will be finished with this round of audits within the next few weeks and will publish the reports, followed by re-opening of deposits on all positions.
Concurrent with our audits, we’ve also engaged in conversations with established solidity security experts to review our contracts on an ad hoc basis. Most recently, Mudit reviewed our xGAMMA staking contract, based on the xSUSHI staking smart contract. We will continue to work with the best and brightest smart contract experts to ensure operational reliability.
L2 Deployment on Polygon, Optimism & Arbitrum
Gamma has been awarded a grant by Polygon. Polygon will be our first L2 destination. Given the low gas cost environment and recent Uniswap v3 deployment, there will be a significant increase in our user base, managed pairs, and TVL as well as the deployment of new strategies that are much more feasible in a low gas cost environment.
The lower gas fees on Polygon allow for more flexibility and less limitations in terms of our strategies. On Mainnet, we are currently paying between $500 — $1,000 per rebalance, so we are unable to embark on high frequency rebalance strategies sustainably; however on Polygon, these rebalances will cost a few dollars or even less in gas. When backtesting the MATIC-ETH pair on Mainnet, we demonstrate very promising results with a more frequent rebalancing strategy.
From September 2021 to January 2022, we’ve backtested 132 days of performance of the MATIC-ETH pair that involved a strategy with 724 rebalances. This strategy outperformed simply holding the assets outside of the LP position by over 30% and generated 167% in net APR.
In Polygon’s proposal to deploy Uniswap v3 to Polygon, the Polygon team has committed up to $20M in incentives. $15M has been earmarked for a long-term liquidity mining campaign, and up to $5M for projects building on Uniswap v3 (Polygon). Given that we’re specifically managing liquidity pairs on Uniswap v3 as well as building on Uniswap v3, we believe our protocol and liquidity providers (LPs) would be well-positioned to receive these incentive rewards. We are also in close conversations with the Polygon team and have recently joined their PolyBuilder’s initiative.
After deployment on Polygon, we expect to deploy on Optimism and Arbitrum. For the past few months, we have been in conversations with many protocols such as OlympusDAO, Futureswap, Perpetual Protocol, TreasureDAO and Pika Protocol about managing liquidity and providing them a means for liquidity mining on Uniswap v3. The #L22022 movement has been strong, and with Uniswap incentives launching on Optimism and Arbitrum, we can expect to see an even larger influx of TVL to L2 networks as Ethereum scales, permitting greater participation in this new DeFi paradigm.
Analytics & User Interface
Most recently, we have added a dedicated xGAMMA staking page that allows stakers of GAMMA to see metrics both globally and on their personal staked position. We are also close to releasing few new UI states which expand additional analytics for individual LP positions, specifically relating to PnL. These new states allow LP’s to compare the current value of their LP positions to the value of their initial deposit (single sided) and simulated full range position of 50/50 deposit.
Additionally, our treasury management clients will soon have a dedicated UI state to make deposits, withdrawals and view analytics on their Gamma managed LP positions. We will also be introducing a migration UI so that Uni v2 and Sushi v2 LP tokens can be easily migrated from those positions to a Gamma managed position.
Collateralization of xGAMMA and LP Positions
We are working to allow our stakers and LPs to be able to take out loans against their xGAMMA and LP positions as well. We are collaborating with many lending protocols that will allow borrowers to stake their xGAMMA and borrow against it. When we get closer to launch of the lending pools, an xGAMMA-ETH pool will be created so that the Uniswap v3 TWAP oracle may be used as a price feed for the collateral (xGAMMA). We are looking to add around $500K of full-range xGAMMA-ETH liquidity in the coming weeks to facilitate this process. Our first step towards this was the listing on Euler Finance which allows GAMMA to be used as collateral.
The ability for users to take out loans against their LP positions is something that will open up many different strategies in terms of hedging the LP positions and leveraging positions to boost returns.
In the past, our LPs would stake assets into NFT Smart Vaults and the LP tokens would be contained within their respective vaults. Going forward, users will no longer need to mint an NFT Smart Vault as the LP tokens will be minted directly to their wallets. Because our LP tokens are ERC-20, this allows for the ability for our LP tokens to be staked for liquidity mining rewards, bonded on Olympus Pro, and collateralized for loans.
Partnership Integrations with Tokemak, Olympus Pro, and KeeperDAO
Our goal of managing active liquidity for DeFi is bringing us beyond usage of Uniswap as the sole venue. Currently, there are many decentralized exchanges and liquidity venues that are developing Concentrated Liquidity Order Books (CLOB) and Request For Quote (RFQ) architectures.
In addition to DEXs, there are protocols that are focused on being an on-ramp for Protocol Owned Liquidity (POL). An on-ramp is necessary and and clearly desired as more than $500M in liquidity has been sourced by these protocols. However, once a protocol owns it’s liquidity who manages it? We have made tremendous progress with integration partnerships in these areas in order to expand our management and grow TVL as POL evolves and liquidity managers are needed. We explain in more detail these partnerships below.
With Tokemak liquidity direction set to go live early this year, there is significant demand for Uniswap v3 to be a liquidity venue for POL, as Reactor holders such as Tracer DAO, APWine, and OlympusDAO are all currently benefiting from the capital efficiency of Uniswap v3 through managed positions by Gamma. However, directing liquidity to Uniswap v3 requires the need for an active manager, a role that Gamma is ready to fill on day 1 of liquidity direction. We are currently having an adapter contract audited so that liquidity from the Tokemak reactors can be directed to Gamma for the management of positions on Uniswap v3.
Gamma has integrated with Olympus Pro for Float Protocol in bonding the FLOAT-ETH Uniswap v3 position via Gamma since November of last year. Users simply deposit FLOAT & ETH into the Gamma interface and receive ERC-20 LP tokens that represent a Gamma-managed Uniswap v3 position. Then those ERC-20 LP tokens are bonded in exchange for discounted FLOAT.
Olympus Pro was designed for protocols to purchase and own their own liquidity, but only allowed for the use of Uniswap v2 or Sushi because ERC-20 LP tokens are needed for Olympus bonds. This means that Uniswap v3 NFT positions cannot be used. However, protocols want to take advantage of the capital efficiency of Uniswap v3 but may not necessarily know how to manage their own liquidity on Uniswap v3 because of its complexity.
The Gamma-Olympus Pro partnership solves both of these issues given that we mint fungible, ERC-20 Uni v3 positions as well as actively manage the liquidity on behalf of these protocols.
We are now discussing this integration with Olympus Pro’s clients, while also partaking in Olympus Pro ourselves for the GAMMA-ETH pair to fully demonstrate the benefits of bonding Uni v3 positions. In the next couple weeks, we will be scheduling an AMA with the OlympusDAO community to bring more awareness for protocols to bond Uni v3 positions via Gamma.
We are currently working on a partnership with KeeperDAO that will integrate an advanced Gamma Hypervisor contract powered by the KeeperDAO Coordination Layer. Essentially, the main opportunity here is to internalize arbitrage opportunities that occur as a result of our rebalances. Currently, all rebalances are being run through the Flashbots Protect RPC which prevents frontrunning and sandwich attacks on our rebalances; however backrunning is still possible. A backrunning transaction is an arbitrage opportunity that results from taking advantage of the new liquidity distribution after a rebalance has taken place. When a backrun arbitrage opportunity is realized by a KeeperDAO keeper, the Hypervisor would receive the majority of the value of this backrun, internalizing more value for our LPs.
New Strategies & Protocol Features
We are engaged groups that are actively developing advanced machine learning algorithms which incorporate a price prediction element to certain strategies and pairs. We have been working with machine learning experts and teams in traditional finance over the past few months to develop these new strategies for our blue chip liquidity pairs such as ETH-USDC, ETH-wBTC, and ETH-MATIC. Since our initial engagements, significant progress has been made and historical performance has been demonstrated. We are excited to showcase these positions with these strategies and open them up for deposits upon our launch on L2s.
Opyn Squeeth Integration
Since December, we’ve been in conversations with the Opyn team about integrating SQUEETH (2x long perp ETH) in our strategies. We are exploring using SQUEETH to hedge a USDC/ETH Uniswap v3 liquidity position as well as the possibility of building a vault that replicates a covered call position which is able to generate semi-passive yield on a pure ETH position. Management of an oSQTH/ETH position will be available upon launch, while we continue to undergo research and development that utilize the minting or buying of oSQTH to hedge impermanent loss in our positions.
In our partnership with KeeperDAO, we are exploring an opportunity for using specialized Keepers in providing Just-In-Time (JIT) liquidity. We would be leveraging the liquidity in Hypervisors when these opportunities arise, allowing our LPs to capture a larger proportion of swap fees generated in a pool in a manner that outcompetes the (JIT) providers which have to use expensive flash loans to provide the liquidity .
Uniswap v2 Migration
Currently under audit with Arbitrary Execution is our Uniswap v2 migration contract. This will allow current protocols on Uniswap v2 to migrate all liquidity to Uniswap v3 and have that managed by Gamma. This will be a seamless transition and will integrate extremely well with protocols who currently have protocol-owned liquidity on Uniswap v2 or are bonding Uniswap v2 positions via Olympus Pro.
Gamma Pro — True Market Making Infrastructure
Currently, we allow our treasury management clients to deposit into private positions for active liquidity management, primarily focusing on increasing capital efficiency and reducing slippage around the price at all times. We develop the strategies in conjunction with the projects that we manage liquidity for, but we don’t view this as directional market making. We view it simply as agnostically managing liquidity.
However, we have determined there is an entirely new ability for strategies which are specific to a token pair to be deployed by a designated market maker which has a different goal than just reducing slippage.
We have been working on building this market making infrastructure which utilizes our contracts and strategy layer to allow any DeFi project to engage a market maker to manage liquidity ranges and conduct trades at their discretion. Projects themselves could also use this infrastructure to conduct buybacks and adjust liquidity bands according to their own strategies.
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Behind the scenes, we have been working on a lot of educational content around Discretionary DeFi, our protocol and our strategies. We will be publishing our first edition on Thursday and new editions will be weekly. The goal of the newsletter is to provide a high level overview of performance, strategies and new protocols in this maturing category of DeFi as well as weekly updates on Gamma developments. You can subscribe to this newsletter here.
This was quite an extensive roadmap, but we are extremely excited to open up all pairs to deposits, L2 deployment, new partnership integrations, better analytics and user interface, and additional strategies and features! Our team has been working hard behind the scenes to deliver the best active management solution on the market, and we are proud to be able to share our goals and plans in one place with our community.
We also want to say thank you to all our community members and partners, for all the support and look forward to launching all these initiatives in the coming weeks and months!