Uniswap, as one of the leading AMM platforms, has updated its product with Uniswap V3 version, allowing users to provide liquidity within a certain price range, optimizing liquidity and increasing earnings from transaction fees. However, relying solely on transaction fee income is often not enough to cover losses due to market volatility. Poolshark introduces the AMM Directional concept, which helps users maximize profits from the liquidity provision through the application of buy and hold strategies across the pools on the platform.
Poolshark offers 2 types of Pool, that is Cover Pool and Price Pool.
Cover Pool is used to protect or secure the position of a liquidity provider. In a Pool consisting of two tokens, ETH and USDC, traditionally AMMs will tend to decrease the amount of ETH and increase the amount of USDC when the price of ETH increases. However, with Cover Pool, on the contrary, the amount of ETH increases because USDC is used to buy ETH, leading to a decrease in the amount of USDC. This helps the LP earn a share of the profit from the ETH price increase to offset losses due to volatility. This loss is the result of a user's LP position selling at an average price lower than the current market price.
To explain better, there are two cases:
Case 1: Set limit for user's LP position
For example, if user Alice wants to buy ETH between 2,000 and 2,200 USDT while the current ETH price is 1,500 USDT, then Alice can set a lower limit of 2,000 and an upper limit of 2,200. When the ETH price reaches 2,000 USDT, Alice will start buying ETH and stop when the price crosses 2,200 USDT.
Case 2: Temporary loss prevention
For example, if user Alice is holding an LP position for the ETH/DAI trading pair on Uniswap v3 with a price range of 1,000 to 5,000 DAI, and the current ETH price is 3,000 DAI, Alice can set a lower limit of 3,000 and an upper limit of 5,000 for temporary loss prevention. If the ETH price falls below 3,000 DAI, Alice will sell ETH and buy it back when the price returns to the range between 3,000 and 5,000 DAI.
Price Pool: Because of the 2-way nature of LPs in AMM, users often face risks on both sides of the price line. However, with Price Pool, users can provide liquidity in a single direction, reducing the risk of trading activities.
Suppose we consider the ETH/DAI token pair. With the Price Pool, users can provide liquidity either way ETH converts to DAI or DAI converts to ETH.
AlphakEY is the founder and an experienced programmer in Smart Contract writing.
Zachary H is the Business Development Lead of Poolshark. He graduated with a bachelor's degree in business administration from Wilfrid Laurier University and worked at Milton Youth Theater Production, a company specializing in planning and organizing summer camps. He also has experience as a Sales Associate at Lowe's Canada company before deciding to join Poolshark in April 2022.
Currently, the project has not announced Tokenomics officially, we will update this information to readers later
There is currently no information about the project's investors and we will update this information for readers when there are latest updates.
Poolshark introduced a new concept called DAMM – to solve the problem of Impermanent loss and bring multiple methods of providing liquidity to users. However, since the project is still in beta and has not officially launched the mainnet, the effectiveness of this protocol has yet to be accurately assessed. Hope the information in the article has helped you to have more interesting knowledge about Poolshark. You can learn more about the project at the following social sites:
Website | Twitter | Medium
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