Introducing Timeswap V2
A sneak peek into our new ultra capital efficient V2 design and the exciting new features
GM Time Travelers… 🧑🚀
It’s the dawn of a new era for all of us at Timeswap.
When we started off on this journey almost 2 years ago in August 2020, we set out with the mission to build the first fully decentralized money market in DeFi. After months and months of building, experimenting, failing and improvising we finally launched Timeswap V1 in March 2022. Since then we’ve done over $4 million of lend / borrow / liquidity volume on our V1 protocol without any token incentives and along the way we’ve learned countless lessons.
While we were in the process of launching V1 earlier this year, we were also exploring ways to improve our AMM to better suit the market needs. After the launch of V1 we spoke with many of our users on how we can improve the product, we also dug deep into data of our user activity and it unearthed many valuable insights.
Together with all our learnings from above, we set out to build an even better AMM. One that is ultra capital efficient, provides flexibility for our users — DeFi degens while still continuing to meet our North Star metric — of being fully decentralized, oracleless and permissionless. And today we are super excited to reveal more info about Timeswap V2. So let’s dive right in!
Timeswap V1 was the first ever fully decentralized money market in DeFi. Since the mainnet launch in March 2022, we have clocked up significant user traction as depicted below. Suffice to say the volumes on Timeswap during an otherwise turbulent market environment for all of crypto showcases the true value proposition of the product.
Total lend volume: $981k
Total borrow volume: $1M
Total liquidity volume: $1.89M (In 2 Months!)
Total no. of transactions: 37.3k
Total unique users: 5.9K
The protocol has functioned without a glitch till date, and also proved the point that there is demand for money markets offering non-liquidatable loans, without oracles or any third-party dependencies.
You may be wondering, if the V1 has functioned so well, why are we launching V2?
Why Timeswap V2?
Over the past few months, we carefully observed the user behaviour as well as spoke to our users to gather more feedback and here are some of our key findings:
- Lenders and Liquidity Prodivers want to have the option to exit the pool before maturity.
- Lenders and Borrowers were not utilising the customize APR/CDP option as much as we expected them to.
- Assets repaid by borrowers cannot be lent out again
- Large size transactions relative to overall pool liquidity causes slippage sometimes leading to risk free arbitrage for borrowers at the cost of lenders / LPs
Based on the above learnings we set out to build Timeswap V2 that addresses all of the above, while still adding significant new features that will help scale the capital efficiency of Timeswap V2 as much as 4x-5x that of Timeswap V1. Stay tuned for more detailed information on Timeswap V2 over the next few weeks.
What is Timeswap V2?
Timeswap V2 is an improved version of Timeswap V1 and increases the capital efficiency of our AMM by 4x–5x while still maintaining all the base layer properties such as permissionless, oracleless and being highly capital efficient.
Our motto from Day 1 has been — ‘Like Uniswap, but for lending/borrowing’, Timeswap V2 takes us closer to our vision. It is a 3 variable AMM like V1 but the AMM has changed to a hybrid AMM[More info on the AMM and major alpha in the near future]. A pool for any pair of ERC20 tokens can be created for a given maturity date and a fixed risk-profile or strike.
Here are some of the most important features of Timeswap V2:
Lenders and Liquidity Providers can exit before maturity:
In Timeswap V1, Lenders/LPs need to wait till maturity to exit the pool.
Timeswap V2 solves this by allowing them to exit anytime they want to. Since Timeswap is a fixed-term protocol, exiting before maturity results in some slippage for lenders / LPs but it gives them the optionality in case they want to exercise this right.
Utilization of Repaid assets:
In Timeswap V1, assets repaid by borrowers before maturity cannot be further lent out.
In Timeswap V2, when borrowers repay before maturity, the assets are added back into the AMM and can be again lent out to future borrowers. This also leads to higher capital efficiency and better price discovery of APR and CDP. Borrowers also need to pay interest only for the duration they were active instead of paying interest till pool maturity.
In Timeswap V1 design, lenders and LPs could not exit the pool before maturity due to the asymmetric design between lenders and LPs on one side and borrowers on the other side i.e borrowing positions were represented using ERC-721 while lending positions were ERC-20, this meant lenders and LPs could not exit the pool natively before maturity.
Timeswap V2 utilizes ERC-1155 implementation to represent positions of lenders and borrowers. This design choice allows creation of a perfect symmetry between lenders and borrowers on each side of the AMM, which leads to the optionality of early exit for lenders/LPs.
In Timeswap V1, a USDC-ETH pool is different from ETH-USDC pool.
In Timeswap V2, USDC-ETH pool is similar to ETH-USDC pool, making it Bidirectional. This means, you can lend/borrow both the tokens from the pool while keeping any of them as collateral. This improves capital efficiency significantly and we expect this design to be used significantly for closely correlated assets such as BTC/ETH
In Timswap V1, large size transactions relative to overall pool liquidity causes slippage, which sometimes leads to risk free arbitrage for borrowers at the cost of lenders / LPs.
Timeswap V2 on the other hand stays always overcollateralized regardless of the transaction size, which is a significant improvement from V1. This also means LPs can confidently add liquidity without worrying about a fat finger lend transaction inadvertently impacting their liquidity position.
All the above features are significant improvements over Timeswap V1 and increases the capital efficiency by 4x–5x. They also open up some really important new use cases which was previously not possible in Timeswap V1. We will be sharing more information on the new design and its use cases in the coming weeks.
Our devs have worked really hard in the past few months to build Timeswap V2. Currently, internal testing of Timeswap V2 is underway and we will soon be rolling out V2 Testnet for Time Guardians and TTWs, which will be followed by the Public testnet. Mainnet launch dates will be announced after we complete public testnet and audits over the next few weeks.
We will be rolling out more content around Timeswap V2 over the coming weeks. Stay Tuned!
Bull or Bear, we BUIDL!
We’ve gone through some turbulent times for our industry in the past few months, many degens and builders have left, discords are ghost towns and twitter memes are peaking as usual in bera market. However, we are deeply greatful to all the Time Travelers who are sticking around and actively contributing to the community, including our Time Guardians and TTWs.
We continue to be guided by our North Star — to build a permissionless and decentralized financial infrastructure for everyone in the world. BULL or BEAR, we BUIDL!