April 1st, 2021 at 3:00 pm UTC · 3 min read
The first generation of liquidity pools has given rise to excitement but also lacks certain qualities. Orbs, through its Liquidity Nexus, will introduce single-sided liquidity farming on any decentralized exchange – a significant step forward for the DeFi industry that will lead to better utilization of capital by liquidity providers.
The prevalent liquidity pool model in DeFi requires liquidity providers to supply both sides in equal values, for example ETH and USDC. Since one’s long term portfolio allocation is rarely distributed evenly, utilizing the portfolio in its entirety becomes a difficult task. Current solutions are extremely inefficient. They involve changing portfolio allocations, which introduces exposure risks and slippage. On the other hand, they offer lending which brings low utilization due to over-collateralization. Finding solutions to these problems requires looking at liquidity pools from a different angle.
The Orbs team Liquidity Nexus protocol aims to bridge liquidity from centralized finance and allows it to be injected into any DeFi project. These traditional stablecoin providers have different risk appetites and APY targets. Instead of creating a wedge between users with different expectations, the goal is to create a united front and let the parties farm together with crypto savvy DeFi participants. Going down this path will result in broader and better overall liquidity and adoption of decentralized finance solutions.
At the same time, not all single-sided liquidity providers are equal. Centralized finance users contributing the stablecoin half take fewer risks, as the principal cannot decrease in value. However, the counterparty providing ETH or DeFi assets encounters higher risks of impermanent loss – but receives accordingly a significantly larger part of the rewards.
The result is optimal for both parties. DeFi liquidity providers are able to provide single-sided liquidity and utilize their crypto portfolio efficiently, with positions like ETH-only that yield very high APYs. Centralized finance stablecoin providers are protected from crypto volatility and enjoy APY that is still significantly higher than expected in the centralized finance world.
The impact of single-sided liquidity on DeFi can open the floodgates for centralized finance liquidity to come pouring in.
Orbs is a public blockchain infrastructure designed for mass usage applications – offering developers a proper mix of performance, cost, security and ease of use. The Orbs protocol is decentralized and executed by a public network of permissionless validators using Proof-of-Stake (PoS) consensus.
Founded in 2017, Orbs is being developed by a dedicated team of more than 30 people out of Tel Aviv, Israel, London, UK, Singapore, Tokyo, Japan and Seoul, South Korea. Orbs was named Gartner’s “Cool Vendor in Blockchain Technology” for 2018.