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Every half hour, the new system will rebalance Uniswap v3 positions, allowing users to earn more fees with fewer single-sided liquidations.
While Uniswap’s highly-touted v3 has recently raced to the top of TVL rankings, the necessity for active maintenance has kept some retail players out of their pools – a situation that a new Gelato Network product aims to address.
The Gelato Network has revealed the specifics of its “G-UNI” Uniswap v3 management system, which was first hinted in a community call last week. G-UNI attempts to maintain a liquidity range of 5-10% inside an asset pair’s current price, with an oracle network monitoring prices and adjusting liquidity pool position ranges every half hour. G-UNI also reinvests trading fees automatically for compounding gains.
“Passive G-UNIs work by just providing very broad liquidity, similar to Uniswap v2 that never has to be changed,” an announcement blog post reads. “It thus can be completely free of anyone’s control as it does not require changes in its price range.”
While Uniswap v3 allows liquidity providers to make more fees by focusing their money at certain prices, it exposes them to the risk of temporary loss if the trading pair’s prices shift outside of the provider’s defined range.
The blog post notes that G-UNI’s auto rebalancing brings the benefits of concentrated liquidity, but with the option of passively managing the position in a manner more in line with Uniswap v2.
“The advantage of this includes that users can sit back and relax as all the difficulties that come with monitoring LP positions are taken care of.”
Composability and incentives
While the new tool may help passive liquidity providers, the true value of G-UNI may be for other DeFi protocols.
Hilmar, a self-described “Legendary Member” of Gelato, pointed out that projects may now incentivise concentrated liquidity in “pool 2” liquidity pools. Pool 2 refers to a native governance asset coupled with a popular base asset, such as ETH or MATIC.
How? With the use of something, we at @gelatonetwork have been working on for a while called 🦄G-UNI🦄!
Curious how G-UNI works? Check it out👇 https://t.co/jT39LYjvPz
— Hilmar X 冰淇淋 团队 (@hilmarxo) June 16, 2021
Projects are frequently required to offer adequate liquidity mining incentives for pool 2 players, as liquidity providers assume the risk of the native governance token’s price falling. Concentrated liquidity rewards may aid in the stabilisation of native asset values to a more consistent range.
Furthermore, G-UNI is an ERC-20 token rather than an NFT, which opens it up to a larger range of potential DeFi applications. Many lending platforms accept liquidity pool tokens as collateral but aren’t yet ready for positions represented as NFTs; G-UNI will allow them to onboard v3 liquidity positions more quickly. Similarly, yield vaults such as Yearn.Finance, which has long planned to add exchange positions, may find it easier to integrate ERC-20s.
G-UNI will be utilised right away in the introduction of Instadapp’s governance token. The team has set aside 1,000,000 INST tokens for INST/ETH liquidity mining, with three-quarters of the rewards focusing on a higher INST price liquidity range.
According to the Instadapp dashboard, the incentive pools are now online and paying 2,200% and 1,800% APY, respectively.