Gyroscope core contributor/educator Flipsidecrypto Data analyst
Gyroscope core contributor/educator Flipsidecrypto Data analyst
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Gyroscope has revolutionized the capital efficiency of liquidity pools!
Let's discuss in details:
Let's start from the beginning...
🌀 Uniswap brought VitalikButerin 's idea of AMM into production in 2018. This was the era of transition from peer-to-peer to peer-to-pool.
🌀Uniswap v1 liquidity pools, used a simple mathematical formula: x*y=k
🌀 Uniswap's pricing mechanism balances pools by adapting token prices to supply and demand.
🌀 It provides liquidity over the entire trading range (0, ∞), so there may be significant price change in larger transactions due to the constant product influence of the model.
Impermanent loss
High slippage
Low capital efficiency
were the weak points of this model.
🌀In November 2019, Michael Egorov, founder of CurveFinance , introduced "Stableswap" in a whitepaper tackling the issues of CP-AMM described above
🌀The idea is to provide concentrated liquidity around the 1:1 price range to increase capital efficiency and reduce slippage costs
This is the "Stableswap" Whitepaper:
https://curve.fi/files/stableswap-paper.pdf
🌀Article Abstract:
Stableswap provides a mechanism to create cross-markets for stablecoins in a way which could be called “Uniswap with leverage”.
Stableswap model:
has no/very little price slippage for trades in the range
is great for price related pairs (stablecoins, stETH/ETH, etc.)
but there is a problem! its still "underutilized" capital in the extremes of the trading range!
In May 2021, Uniswap v3 was launched and improved Uniswap v2 in several aspects.It introduced: "Concentrated liquidity"!
Last model problem was the providing of liquidity across the entire range, leading to: low capital efficiency high slippage large impermanent losses But V3 allows liquidity provision in a "certain price range" chose by user
Uniswap V3 concentrated liquidity pools:
Increase the return for liquidity providers
Reduce slippage for traders.
there is no trading/fees outside the price range
May require more active position management by LPs
Now that we reviewed three kind of different pools... What if we combined the advantages of all the pools mentioned? This is where the gyroscope E-CLP (Elliptical concentrated liquidity pool) pools come into play!
Let's do some math! If we stretch a circle, then we have an ellipse. If we now rotate our ellipse by Φ and transfer it to the point (a,b), our E-CLP is almost ready!
🌀What is the price range here?
- Price Range is defined by the slope of the ellipse curve where it meets the x / y axis:
🌀What is the Peg Price?
The peg price is the price at the flattest part of the ellipse. The price does not have to be symmetric about the x=y line The slope intersects the x-axis at an angle of Φ in our ellipse The price does not have to lie within the trading range
🌀The price impact of a given trade increases as one moves away from the peg price.
🌀The convexity of the curve increases the further one moves away from the peg price.
Don't let the math confuse you Just know that E-CLP concentrates liquidity where it needs to be!
E-CLP Creates custom liquidity profiles Asymmetric price spreads: Concentration of liquidity e.g. around 1 with price limits of 0.9 and 1.01 LSD/ETH Extremely flexible: E-CLPs can be calibrated to approximate most desired trading curves.
E-CLP lowers operational burden on LPers👇 How?
All assets are in a ‘single tick’ with pool-wide price bounds
Burden of managing the liquidity is on pool constructors (rather than the LPs)
There is no active position management, so there is no "arms race" among LPs
Having all of these characteristics, what are E-CLP use cases? Stablecoin reserve: Gyroscope uses E-CLP for its reserve Liquid staking derivatives Gyroscope has built many LST-based E-CLP pools that maximize both capital efficiency for protocols and rewards for LPers
To give you a tiny example of the capital efficiency of E-CLPs, I recommend reading this tweet from
This table gives you an overview of liquidity pools and how they compare to Gyroscope E-CLPs:
Now lets have a quick ELI5 recap! Gyroscope tried to develop its stablecoin, but found the lack of an appropriate liquidity pool architecture suitable for stablecoins/LST derivatives to achieve maximum capital efficiency etc;
Therefore, it began building the next generation of liquidity pools, taking advantage of and improving upon the last pool models. The result is something that helps Gyroscope reach more than 20 million TVL without even fully launching!!!
https://x.com/Mrfti_plus/status/1715764257503990178?s=20
Wanna get more involved into Gyroscope ?
Website: https://gyro.finance
Discord: https://discord.gg/aVpykt58
Docs: https://docs.gyro.finance
Github: https://github.com/gyrostable
And don’t forget to follow me on X:
Gyroscope has revolutionized the capital efficiency of liquidity pools!
Let's discuss in details:
Let's start from the beginning...
🌀 Uniswap brought VitalikButerin 's idea of AMM into production in 2018. This was the era of transition from peer-to-peer to peer-to-pool.
🌀Uniswap v1 liquidity pools, used a simple mathematical formula: x*y=k
🌀 Uniswap's pricing mechanism balances pools by adapting token prices to supply and demand.
🌀 It provides liquidity over the entire trading range (0, ∞), so there may be significant price change in larger transactions due to the constant product influence of the model.
Impermanent loss
High slippage
Low capital efficiency
were the weak points of this model.
🌀In November 2019, Michael Egorov, founder of CurveFinance , introduced "Stableswap" in a whitepaper tackling the issues of CP-AMM described above
🌀The idea is to provide concentrated liquidity around the 1:1 price range to increase capital efficiency and reduce slippage costs
This is the "Stableswap" Whitepaper:
https://curve.fi/files/stableswap-paper.pdf
🌀Article Abstract:
Stableswap provides a mechanism to create cross-markets for stablecoins in a way which could be called “Uniswap with leverage”.
Stableswap model:
has no/very little price slippage for trades in the range
is great for price related pairs (stablecoins, stETH/ETH, etc.)
but there is a problem! its still "underutilized" capital in the extremes of the trading range!
In May 2021, Uniswap v3 was launched and improved Uniswap v2 in several aspects.It introduced: "Concentrated liquidity"!
Last model problem was the providing of liquidity across the entire range, leading to: low capital efficiency high slippage large impermanent losses But V3 allows liquidity provision in a "certain price range" chose by user
Uniswap V3 concentrated liquidity pools:
Increase the return for liquidity providers
Reduce slippage for traders.
there is no trading/fees outside the price range
May require more active position management by LPs
Now that we reviewed three kind of different pools... What if we combined the advantages of all the pools mentioned? This is where the gyroscope E-CLP (Elliptical concentrated liquidity pool) pools come into play!
Let's do some math! If we stretch a circle, then we have an ellipse. If we now rotate our ellipse by Φ and transfer it to the point (a,b), our E-CLP is almost ready!
🌀What is the price range here?
- Price Range is defined by the slope of the ellipse curve where it meets the x / y axis:
🌀What is the Peg Price?
The peg price is the price at the flattest part of the ellipse. The price does not have to be symmetric about the x=y line The slope intersects the x-axis at an angle of Φ in our ellipse The price does not have to lie within the trading range
🌀The price impact of a given trade increases as one moves away from the peg price.
🌀The convexity of the curve increases the further one moves away from the peg price.
Don't let the math confuse you Just know that E-CLP concentrates liquidity where it needs to be!
E-CLP Creates custom liquidity profiles Asymmetric price spreads: Concentration of liquidity e.g. around 1 with price limits of 0.9 and 1.01 LSD/ETH Extremely flexible: E-CLPs can be calibrated to approximate most desired trading curves.
E-CLP lowers operational burden on LPers👇 How?
All assets are in a ‘single tick’ with pool-wide price bounds
Burden of managing the liquidity is on pool constructors (rather than the LPs)
There is no active position management, so there is no "arms race" among LPs
Having all of these characteristics, what are E-CLP use cases? Stablecoin reserve: Gyroscope uses E-CLP for its reserve Liquid staking derivatives Gyroscope has built many LST-based E-CLP pools that maximize both capital efficiency for protocols and rewards for LPers
To give you a tiny example of the capital efficiency of E-CLPs, I recommend reading this tweet from
This table gives you an overview of liquidity pools and how they compare to Gyroscope E-CLPs:
Now lets have a quick ELI5 recap! Gyroscope tried to develop its stablecoin, but found the lack of an appropriate liquidity pool architecture suitable for stablecoins/LST derivatives to achieve maximum capital efficiency etc;
Therefore, it began building the next generation of liquidity pools, taking advantage of and improving upon the last pool models. The result is something that helps Gyroscope reach more than 20 million TVL without even fully launching!!!
https://x.com/Mrfti_plus/status/1715764257503990178?s=20
Wanna get more involved into Gyroscope ?
Website: https://gyro.finance
Discord: https://discord.gg/aVpykt58
Docs: https://docs.gyro.finance
Github: https://github.com/gyrostable
And don’t forget to follow me on X:
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