Discover the Power Of Liquidity Book V2.1 And Autopools For DeFi Yield Farming

April 11, 2023 - Around 7 mins mins to read

Key Points:

Liquidity Book V2.1 offers market-leading levels of customization and flexibility, and Autopools provide an automated liquidity strategy execution vehicle for Liquidity Book pools.
The permissionless pool option will soon be introduced, allowing anyone to open Liquidity Book Pools with an out-of-the-box configuration.
The Limit Orders feature will be introduced on Liquidity Book Markets, allowing users to create swap instructions for buying or selling a token at specific price points.

Liquidity Book V2.1 and Autopools offer market-leading levels of customization and flexibility for DeFi Yield Farming, democratizing access to its power. This article will discuss the features of Liquidity Book V2.1 and Autopools, along with the upcoming Limit Orders feature and the Audit Contest Program.

Liquidity Book has released V2.1 of its platform, specifically designed for DeFi Yield Farming by Trader Joe. The platform features market-leading levels of customization and flexibility, and V2.1 further democratizes access to the power of the Liquidity Book. The bespoke platform has been built from the ground up for Liquidity Book’s innovative discretized liquidity architecture. V2.1 is expected to offer a market-leading experience and marks the beginning of Trader Joe’s pioneering efforts to shape the future of AMMs and their role within DeFi ecosystems.

Autopools

Autopools are an exciting addition to the Trader Joe platform, offering an automated liquidity strategy execution vehicle for Liquidity Book pools. These pools allow users who do not want to actively manage their liquidity positions to utilize an Autopool instead.

The first Autopools will run a basic market maker strategy, concentrating liquidity around the active bin when volatility is low and widening the spread as volatility increases. Inputs include twap and volatility, while outputs include position and shape size.

What makes Autopools even more exciting is the use of off-chain scripts controlled by a ‘Black Box’ to execute strategies. This enables dynamic updates in real-time and a constant iteration process for improved performance, optimizing market conditions.

Autopools are in the final stages of testing, and more information on launch strategies and deployment details is expected soon. With Autopools, Trader Joe aims to provide a fully native ‘liquidity-as-a-service’ experience, built by a passionate team committed to driving innovation and sustainability in the AMM space.

One-Click Yield Farming: Autopool Farms

One option available in the realm of decentralized finance (DeFi) is to deposit tokens into an Autopool. In exchange, users receive a token receipt that can be used for various DeFi activities, including yield farming, collateralization, and leverage. This approach, known as the ‘V1’ style of DeFi yield farming, has gained popularity among many users. Its viability is due in part to the fungible liquidity architecture of Liquidity Book.

Trader Joe, a participant in DeFi, is currently collaborating with various partners in Arbitrum, Avalanche, and BNB to explore the integration of Autopool token receipts for use in other DeFi applications.

sJOE Stakers to Receive Fees from Liquidity Book Pools

The Liquidity Book pools will incur fees which will be shared with sJOE Stakers as a percentage. This sharing of fees will be limited to each respective chain, meaning that sJOE on Arbitrum will only share fees on that particular chain, while sJOE on Avalanche will share fees on that chain alone. The sJOE Fee share is now active for all V2.1 Liquidity Pools currently being launched on Avalanche. As more migration and deployment of V2.1 pools occurs, sJOE is expected to expand further.

The Fee Share Rate for each market grouping is provided below:

Stables: 0-5%
Alt Stables / Staked: 10-25%
Majors/Network Tokens: 10%
Alts: 15-20%
Long-Tail: 25%

It’s important to note that the final fee share is subject to change, and the Core Team reserves the right to adjust the fee shares at the market level once it’s live to ensure optimization for all users.

Permissionless Pools

At present, Liquidity Book Pools require permission. However, a permissionless pools feature is soon to be introduced. This will allow anyone to open Liquidity Book Pools with an out-of-the-box configuration, set at 100 bps discretisation, equivalent to a 0.8% base fee for trading. It’s important to note that permissionless pools can only be paired with whitelisted quote assets, including Avalanche (AVAX, USDC, BTC.b and UTDT) and Arbitrum (ETH, USDC, USDT and BTC.b). New discretisation configurations may be added in the future.

The permissionless pool option is expected to go live in the coming week(s). Nonetheless, governance remains the best pathway for projects desiring a custom-fit market for their token. Governance proposals can be launched in the Trader Joe Discord Forum.

Fees Updates

Liquidity Book V2.1 has undergone a complete code overhaul, implementing several key optimizations. The updated version is expected to greatly enhance the user experience for transacting or managing liquidity on the Liquidity Book by reducing the average gas cost by 30-40%. This improvement is anticipated further to drive the adoption of users and partner protocols seeking to build on top of the AMM.

A notable optimization in V2.1 is that users can no longer claim the fees they accrue. Instead, all fees will be automatically claimed and compounded into the active bin from which fees were accrued. This improvement is only possible thanks to the fungible discretized bin architecture that Liquidity Book is built on. Users can track all fees accrued per hour or by bin using analytics built into the Liquidity Book pool pages.

New Pools

As a result of the complete code overhaul, all contracts for Liquidity Book V2.1 are completely new. Therefore, Liquidity Book Pools will be migrating from the current V2 version to V2.1 in tranches to minimize disruption across the platform. The straightforward migration process involves withdrawing liquidity from the existing pool and then re-depositing it into a new Liquidity Pool.

The main focus on migration to V2.1 pools will begin with smaller Liquidity Pools on Avalanche and gradually scale up from there across chains. The migration process for all chains is anticipated to take several weeks. All Liquidity Pools with a “migration” sign will have an active V2.1 pool that can be migrated to. For a step-by-step guide to this process, please refer to the manual provided.

Liquidity Book to Introduce Limit Orders

A new feature is set to be introduced on Liquidity Book Markets that allows users to create swap instructions for buying or selling a token at specific price points. This will be an inbuilt feature and will act as a ‘Maker’ style liquidity order. Users will deposit tokens into a Liquidity Book pool with an instruction to withdraw the liquidity once the desired price is met.

This will give Liquidity Providers complete control over their provisioning strategy, enabling them to execute swaps at precise price targets without incurring any costs. Additionally, Liquidity Providers will earn their share of fees accrued by the Pool while executing the limit order. The launch date for the Limit Orders feature has not been announced yet.

Liquidity Book undergoes Immunefi Audit Contest Program

Liquidity Book has announced that their partner, Paladin Security, has conducted audits on Liquidity Book V2.1 and Autopools. To ensure the highest level of security for their protocols and code, Liquidity Book has decided to participate in an Audit Contest program with Immunefi in the near future.

Conclusion

Liquidity Book’s V2.1 platform release comes along with exciting new features such as Autopools, permissionless pools, and limit orders. These features aim to provide a fully native ‘liquidity-as-a-service’ experience built by a passionate team committed to driving innovation and sustainability in the AMM space.

Besides, the complete code overhaul reduces the average gas cost by 30-40%, which is anticipated to enhance the user experience for transacting or managing liquidity. Furthermore, Liquidity Book has announced that their partner, Paladin Security, has conducted audits on Liquidity Book V2.1 and Autopools. The company has decided to participate in an Audit Contest program with Immunefi in the near future, ensuring the highest level of security for their protocols and code.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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