A New Farm — Concentrated Liquidity Strategy Vault
Orca’s Wave 1 of the Whirlpools Builders Program is an exciting opportunity for Tulip Protocol to expand our product suite across the Solana DeFi ecosystem. We’re honored to be a part of Orca’s commitment to supporting developers who deliver innovative products.
What is Orca?
Orca is the easiest place to trade cryptocurrency on the Solana blockchain. On Orca, you can trade tokens cheaply, quickly, and confidently. Additionally you can provide liquidity to a liquidity pool, including concentrated liquidity pools (Whirlpools) to earn trading fees and token emissions.
“Orca’s goal is to provide infrastructure that allows anyone to build web3 applications faster, more easily, and with the best user experience. To that end, the protocol is committed to supporting developers who demonstrate a willingness to build, ship, and embrace an open-source ethos.”
— Ori Kwan, co-founder of Orca
A New Farm
Tulip Protocol has partnered with Orca to build concentrated liquidity vault strategies that reduce divergence loss and auto-compound rewards.
The vault consists of a hybrid auto compounding and rebalancing strategy that allows grouping of user deposits into a select number of tick ranges. This combines compounding of liquidity provision rewards and price/tick range management within a pre-defined epoch.
We have also added a new feature “Autoswap” powered by Jupiter Aggregator in our backend. This allows users to deposit uneven assets into the LP and our backend will automagically swap it to balance out before creating the LP without ever having to navigate into an AMM. With this vault, users will experience a one click process to enjoy sustainable yield.
How does this work?
If the actual price of the pair exceeds a threshold in the given price/tick range, the vault removes the liquidity until the next epoch. This allows the strategy to manage Impermanent Loss, which is a concern for concentrated liquidity pools, especially when one of the paired assets is volatile.
It is important to understand the different types of concentrated liquidity strategy vaults and how they are managed. There are three main categories of vaults: stable, pseudo stable, and non-stable, each with with their own risks.
Pure stable vaults: both paired assets are stablecoins. This category includes pairs like USH/USDC, USDH/USDC, USDT/USDC, UXD/USDC, etc. Pure stable vaults are typically managed using a strict strategy, which rebalances the position once the current tick index changes from the tick index that was active when the position was created.
Pseudo stable vaults: theoretically trade/pegged at price ratios similar to stable swaps, but paired assets aren’t price stable. This category includes pairs like SOL/stSOL, SOL/mSOL, etc. Pseudo stable vaults are usually managed using a midpoint strategy, which rebalances the position when the tick index changes by more than 50% from the tick index which was active when the position was created.
Non-stable vaults: only one asset is stable, or neither paired assets are price stable. This category includes pairs like SOL/USDC, SOL/DUST, etc. Non stable vaults are typically managed using a variable strategy, which rebalances the position when the current tick index changes by X or more from the tick index which was active when the position was created.
Tulip Protocol is excited to partner with Orca to build concentrated liquidity vault, and stay tuned for more vaults for your favorite Whirlpools coming soon!
