On planet Arrakis, 𝘸̶𝘢̶𝘵̶𝘦̶𝘳̶ liquidity is the most sacred resource.
Mission: to become web3’s liquidity layer, optimising DEX liquidity for tokenized projects on and across multiple blockchains in a seamless and automated manner.
The platform is a reaction to the problems that many projects in web3 are facing today:
- Traditional Uniswap v2 AMMs provide a one-size-fits-all liquidity solution. While being simple, they lack efficiency and are costly to subsidize liquidity programs
- Next generation AMMs like Uniswap v3 provide liquidity efficiency improvements, however at the cost of added complexity and risk to LPs
- The multichain landscape made liquidity increasingly fragmented & the operational overhead of managing liquidity exponentially higher
- Projects are forced to spend an unnecessary amount of time & resources on complex topics such as active liquidity management, cross-chain liquidity provision, and modeling expenditures on market making programs
- Besides liquidity management, these projects have the liquidity inventory problem, which is how they should actually get funds in these liquidity pools in order to make their token liquid
Key components exist that projects should take into consideration when they think about liquidity:
- Slippage - difference between the expected price of a trade and the price at which the trade is executed at
- Volatility - A measure of how big price movements are
- Volume - Total number of tokens exchanged between buyers and sellers
- Liquidity Depth - The degree to which tokens can be bought/sold at a stable price
- Capital Efficiency - how efficiently funds are used to make markets
In the current DEX environment there is a trade off in terms of ease-of-use and the efficiency of the above components. AMMs with a constant function market maker curve, meaning any AMM that only has 1 price curve such as UniswapV2 and their forks make the largest trade off in this section. These AMMs provide liquidity from a price of 0 to ∞ meaning that they are extremely capital inefficient since the price of an asset is neither close to 0, nor close to ∞. Due to this capital inefficiency it affects all the other components. It results in low liquidity depth, because the funds for liquidity are distributed equally throughout the whole price range, this of course makes there be a high amount of slippage. A high amount of slippage means that there is a lot of volatility, as well as means there is low amount of volume as people don't like trading something with high slippage.
Due to these factors we truly believe that a protocol like Arrakis is required that helps projects, make concentrated liquidity DEXs such as Uniswap V3 easier to use, furthermore making liquidity no longer be a topic that projects need to care about themselves. As a project matures, the liquidity profile should mature as well. Via automated liquidity optimisation we can make sure that a project gets what it needs in terms of liquidity at the moment in time.
Arrakis, previously known as G-UNI, set out to solve these issues in February 2021. Since that time, the protocol has demonstrated exceptional growth on every conceivable metric. As of this writing (21st May 2022), Arrakis has $745 million in TVL in its LP vaults — which comprises roughly 19% of Uniswap v3’s entire liquidity.
This makes Arrakis the largest LP on Uniswap v3 by far, all without having any native liquidity mining incentives.