This proposal outlines a pilot proposal for the Barnbridge DAO to utilize Visor Finance to manage BOND/ETH liquidity purchased via Olympus Pro on Uniswap v3. Visor Finance is an active manager focused on liquidity provisioning strategies on Uniswap v3. Visor Finance currently manages over 20 pairs on Uniswap v3 and provides infrastructure & strategies for individuals and protocols to use their funds to provide liquidity and generate yield.
Managing the price range on Uniswap v3 requires active management, which is provided by Visor Finance and its research organization Gamma Strategies. As the price of BOND varies, Visor will use the strategies developed by Gamma to manage price ranges so that the current price stays within range, sufficient liquidity is maintained, and impermanent loss is mitigated.
The capital efficiency of Uniswap v3 offers many advantages. Given that much of the liquidity will be concentrated around the current price tick, there will be less slippage for same volume trades on the same amount of liquidity as on Uniswap v2. For example, concentrating liquidity around +/-50% band around the current price may have up to 4x the capital efficiency and require less than 25% of the liquidity as on Uniswap v2. See calculation here: BOND Capital Efficiency Calculations - Google Sheets .
Another advantage of Uniswap v3 is that providing concentrated liquidity allows the LP to generate a higher fee multiple. However, this must be counterbalanced with the potential for higher impermanent losses. In our experience, providing wide ranges during periods of high volatility and narrower ranges during periods of low volatility mitigate the effects of impermanent loss and allow higher returns than a Uniswap v2/Sushiswap passive strategy.
Based on Barnbridge’s bond program with Olympus Pro, Visor Finance can manage the purchased liquidity on Uniswap v3. Visor Finance will manage the ranges to ensure that the prices stay within range while also controlling for impermanent loss. For its management services, Visor Finance takes 10% of Uniswap swap fees and distributes that to stakers of VISR. 90% of the earned fees will be re-invested back into the liquidity position. All gas fees for rebalances and re-investment of earned fees are paid for by Visor Finance.
Based on bonding 15K BOND using Olympus Pro over 4 weeks, approximately $300K of liquidity will be managed on Uniswap v3 upon receipt of liquidity
All WETH/BOND purchased liquidity will be repurposed in a Uniswap v3 pool.
- Managing BOND/ETH liquidity on Uni v3 can achieve lower slippage on the same amount of liquidity due to the capital efficiency, so the threshold level of capital needed for liquidity is reduced
- Aligns with the ethos of having protocol-owned-liquidity and reducing liquidity incentives because of the potential for earning higher yields on Uni v3 and reducing the amount of liquidity needed
- Sudden price divergence in the price of WETH/BOND can cause larger impermanent loss in the short term if price ranges are not managed accordingly