Angel Liquidity Vaults: Get Comfy this Crypto Winter
Liquidity (the money available for trading) is the lifeblood of crypto but normal liquidity pools also come with a significant, but not so obvious, cost: the project’s strongest supporters are putting their tokens up for sale. They must deposit the project’s token on an exchange to provide liquidity in order for someone else to buy it.
Why can’t we create a new type of liquidity program that keeps more value in the community?
ICHI Angel Vaults do this by providing necessary liquidity without selling tokens.
The first Vault was launched on November 30th and it provided stability for $ICHI’s price during two -20% market crashes in the first two weeks. Now other communities are launching their own Angel Vaults.
Liquidity powers decentralized finance, making it possible to build a secure and robust financial system without relying on centralized custodians or intermediaries to trade assets. Liquidity providers earn trading fees when traders swap assets by depositing their money into decentralized exchanges like Uniswap.
However, not all liquidity is the same.
In Uniswap V2, all liquidity was added in the full price range, from 0 to infinity. As a result, the majority of this liquidity is never used in trading and liquidity providers earn less in trading fees. This is because most assets usually trade within certain price ranges and assets that liquidity providers add to a liquidity pool outside of that range don’t earn fees.
Uniswap V3 introduced the idea of concentrated liquidity where every liquidity provider could allocate assets to a liquidity pool within a custom price range. In Uniswap V3, liquidity providers earn exponentially more trading fees for each dollar deposited when the price range for the two assets in the pool is within the custom price range they have chosen.
But there’s also a significant drawback related to the rewards you can earn through V3 and that is if the market price moves outside of your specified range, your liquidity will stop earning fees. Managing liquidity positions to ensure their price ranges remain active is confusing and expensive for users. A majority of liquidity on V3 is actually now outside of trading range and thus not earning fees!
Another byproduct of the custom price ranges made possible through V3 has been that liquidity providers are no longer provided fungible ERC20 LP tokens to prove that they own liquidity in a given pool. In V2, the LP tokens for a liquidity pool were all worth the same because the price range for all assets in that pool was set between 0 and infinity. V3 LP tokens are non-fungible since they must represent a specific price range for two assets in a liquidity pool, making it impossible to use them in existing liquidity rewards contracts.
Angel Liquidity Vaults
Today, we are releasing ICHI Angel Vaults to combine the rewarding and simple experience of Uniswap V2 with the concentrated liquidity of Uniswap V3. This means that liquidity providers earn more fees without having to actively manage their price ranges.
In addition to providing liquidity providers better trading fees, ICHI’s new protocol provides a number of features that benefit the projects that establish Angel Vaults, including:
- Buy Liquidity, providing single asset liquidity underneath the price of a participating project’s token increases the price of that token.
- Deflationary Liquidity Rewards: By creating branded dollars through ICHI and then establishing an Angel Vault with that branded dollar, crypto projects can offset the cost of liquidity rewards. This is due to the upward price pressure created from locking the community’s scarce token when minting its branded dollar and then using it as the single asset deposited in the Angel Vault.
- Protocol Owned Liquidity (POL), depositing a portion of the assets backing that project’s branded dollar into the Angel Vault creates sustainable, long-lasting liquidity.
ICHI’s Angel Vaults are the easiest and most cost effective way for projects to increase their liquidity floor, enabling:
- LPs to earn more trading fees with less,
- Liquidity rewards to increase the amount of buy side liquidity without also incentivizing sell pressure,
- The inflationary cost of rewards to be offset by the deflationary minting of the project’s branded dollar, and
- Protocols to build assets under management (AUM) backing their branded dollar.
Angel Vaults creates concentrated buy-side liquidity pools using Uniswap V3. These buy-side liquidity strategies ensure that there is always liquidity of the deposited token under the price of the other asset in the Uniswap v3 pool. As the price of the assets change, the strategy rebalances the pool to put buy-side pressure on the other asset.
Example: A oneUNI Angel Vaults creates a position in a Uniswap v3 pool that has the oneUNI<>ICHI pair. The Angel Vault receives only oneUNI from LPs (and returns an ERC-20 LP token) and uses that to provide buy limit orders (holding oneUNI liquidity under the current price range) on ICHI within the pool. As the price of the ICHI fluctuates, the Angel Vault rebalances, ensuring it remains concentrated on the buy-side of the token.
Branded Dollars are a complementary feature to any project’s Angel Vault. When used together, Branded Dollars and Angel Vaults enable projects to lock their scarce crypto token within a Branded Dollar treasury. This removes supply in the open market and provides upward price pressure on the scarce crypto asset offsetting incentives provided by the protocol to LPs.
Protocol Owned Liquidity
Another key feature that highlights the synergy of Branded Dollars and Angel Vaults is its use in converting Total Value Locked (TVL) into Assets under Management (AUM). When Branded Dollars are minted, scarce crypto is locked into a treasury that is governed by the protocol and its users. Incentivizing LPs to stake their Vault LP tokens, inherently incentivizes those users to mint or purchase branded dollars which converts the scarce crypto used to mint into assets governed by the project itself.
Audits and Bug Bounty
Angel Vaults have gone through both an official review by Quantstamp as well as an audit by CertiK. ICHI also runs a bug bounty through Immunefi that pays developers who are able to find bugs in the platform’s smart contracts and notify the core team.
The first vault, launching today, will be the oneUNI Vault. This vault will allow LPs to deposit Stable UNI and get vault LP tokens (ERC-20) in return. The Stable UNI will be paired with ICHI in its Uniswap v3 position and rewards for staking the vault LP will begin 7 days after launch. Head over to app.ichi.org to see the countdown until ICHI rewards begin.
For partner projects interested in creating an Angel Vault, feel free to hop into our #partner-proposals channel on our Discord server.
Start using Angel Vaults in 2 easy steps!
- Get Branded Dollars either through Minting or by purchasing them on Uniswap v3.
- Go to https://app.ichi.org/vault and provide Liquidity/stake your LP tokens.
Angel Liquidity Vaults build on ICHI’s unique Decentralized Monetary Authority (DMA) protocol which enables any crypto project to create a branded dollar, worth exactly $1, backed by their native token. These stable assets keep more value within the project by creating a reliable, everyday currency that can easily be used to pay for business operations and investing in DeFi. ICHI has helped eight leading projects including ShapeShift, 1inch Network, DODO and others launch their own stable tokens. To date, more than $20 million branded dollars have been minted.