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We’d like to say massive thanks to all of you who joined the event co-hosted by The Honey Jar and Orange Finance on 6th July 2023. We appreciate all your support. This is a recap of the event, in case you missed it!
Listen to the recording of the PSY’s first community call session here.
Umeshu (The Honey Jar):
Firstly, allow us to introduce ourselves and our partnership. Honey Jar is a gateway to Berachain's innovative DeFi project and a partner of Orange Finance. We came together due to shared policies and goals, especially since Orange Finance is creating something genuinely innovative in the DeFi space. We met in Japan during the Berachain events in Tokyo. Our partnership has attracted numerous new users from the Honey Jar ecosystem to Orange Finance. We hope to use this AMA session to encourage as many questions as possible. Orange Finance has launched a wide range of new products and has several upcoming developments. This forum allows participants to ask any questions they may have. If you wish to ask a question, please click on the 'request' button at the bottom of the page to gain speaker access. Feel free to inquire about our future roadmap, product upgrades, or anything about the team. This is your opportunity to gain insights before anyone else.
Sino (Orange Finance)
Thanks to our community, we've already received a bunch of questions on Twitter and Discord. However, additional questions are always welcome.
Orange Finance is basically an active liquidity manager, focusing on concentrated liquidity AMMs like Uniswap v3. By leveraging the liquidity position, users can also enhance their fee revenues, thereby achieving higher liquidity on AMMs compared to others. However, it's considerably risky to narrow this adjustment due to the risk of impairment loss. As a result, the costs are also leveraged. Thus, Orange Finance aims to assist liquidity providers in managing the aggressive, narrow range on these concentrated liquidity AMMs. This concept serves as the initial starting point of Orange Finance.
And we have already launched three vaults. The primary vault is the Alpha Orange vault, which implements dynamic hedging instead of delta neutral. This means the hedge ratio varies depending on the market situation. For instance, we don't hedge in a bull market, but in a bear market, we aim to hedge. Hence, the hedge percentage changes dynamically. That's our first main vault. Our second and third vaults belong to the Lab sector, functioning as delta neutral hedge vaults. These vaults always hedge 100% of the ETH position, meaning all of the ETH in liquidity comes from borrowed assets from Aave. Users just need to deposit USDC; part of the USDC goes to liquidity, and part of it is used as collateral on Aave. Against this, we borrow ETH, combine the ETH and USDC, and then put it into the liquidity. Therefore, you don't have any asset exposure on ETH in this vault, which helps to mitigate the risk of ETH price movement. That's the essence of the delta neutral approach.
Regarding milestones, we are still in the alpha version of Orange Finance. We initially launched the vault and managed to conduct a backtest prior to the launch. Following the launch, we were able to confirm that the vault is functioning in line with the backtest strategy. I believe this constitutes one of the significant milestones for Orange Finance.
I've touched briefly on the Delta Neutral Vault, so let me explain it again. The Delta Neutral Vault on Orange is a vault that provides liquidity on AMM with deposited USDC from users and borrowed ETH from Aave. This structure mitigates damage from price fluctuation, allowing users to enjoy only the fee revenue.
We have been running two Delta Neutral Vaults, both being ETH-USDC pools on UniV3 with a 0.05% fee tier. This is to make a comparison while changing only one parameter. Currently, the performance is approximately -0.05% over one month, which equates to about -0.6% APR.
The process is completely automated, and it's all about balancing the cost and fee revenue. The costs include borrowing ETH from Aave, swap costs during rebalancing, and losses from gamma exposure. Gamma represents the change in delta, so as the ETH price moves up or down, the delta changes. We maintain delta neutrality at the moment of rebalance, but as the ETH price shifts, we regain some delta. This is one of the reasons why we need to rebalance the position.
To clarify, the losses caused by gamma exposure represent the major costs we incur. Our strategist just finished upgrading our backtesting tool and has started analyzing the data. This will allow us to understand how to improve the strategy for this particular vault. This is also why it's currently in the Lab. We are actively collecting data to refine the strategy over time.
Camelot is a very great team. And it was always my thought that other AMM may have better liquidity efficiency compare to Uniswap. so anyway I took a amount of the in-range liquidity and trading volume from the graph, and see it is true. Orange is on Arbitrum, and Camelot is very popular so we DMed to Camelot team. That was a starting point of our connection.
And as we research on the Camelot, we see it has a lot of potential and also the Camelot is very strong team. Our partnership must brings better DeFi experience for users on Arbitrum.
They recently launched Camelot v3, which is a concentrate liquidity. Orange Finance is absolutely can be helped improve the UX for user interacting with Camelot v3.
The competition among DEXes has become particularly fierce lately, especially after the Uniswap v3 license expired and Uniswap v4 is announced. And so many different types of AMM revolutional one is coming out like Carbon and Maverick has been recently successfully done IDO.
Orange is known as a active liquidity manager on AMM. It is a structured product, in more general terms, on AMM that is product focusing on gaining revenue from the swap fee. Swap fee is, I know some people love this term, it’s a real yield! So, more competition and more diversification around the DEX is an opportunity to leverage strengths of the Orange.
And I’m feeling that the the environment for Liquidity Provider is changing. It used to be a must be hell for liquidity providers. I’ve seen so many liquidity manager start and stop the operation. I also see a project that tried to start and after researching on this field and run some backtesting, stop before even launch. So I understand this field is easy to dream but hard to make it come true. And again, I’m feeling that the the environment for Liquidity Provider is completely changing. DEX field used to be putting all the energy for swappers. concentrate liquidity, aggregate all the pools and find a best one, that’s all for swappers to provide a best deal among DEXes to gain the trading volume.
And now a days, many DEXes has been showing up with mind blowing improvement for swappers and some is beneficial for Liquidity Providers. Uniswap v4, Carbon, and Maverick. All those are taking different approach, but all those have brought improvement for liquidity providers. So Maverick, they are combined AMM and liquidity strategy, brought liquidity provider’s easier UX, and better result/ outcome. And Carbon. they introduce a directional liquidity that decouples the liquidity and allowed liquidity provider gain revenue not from the fee revenue, but a actual spread. It’s more close to the order book like experience to liquidity providers. They don’t call it liquidity provider anymore, it’s rather a trader on Carbon. It’s just started but we are started researching strategy on Carbon actually. And Uniswap v4. you know, it’s all about hooks. It’s all depends on how you utilize the hooks. Sigleton, FlashAccounting those features are good. Vanilla pool is going to be the main pool for users. There would be many things that can benefit not only DEX projects, but also Liquidity Manager. Like, for example, I think it is possible to create a hooks to mitigate toxic-flow with dynamic fee. like that. Last week AI N (alex) posted his thread that talk about the way of dynamic fee mitigates the loss by a arbitrageur. That’s a great idea and absolutely we can implement it with hooks.
So I see recent trend on the DEX is very good for Orange.
One challenge that Orange faces is that it's a gas-consuming product. Therefore, we cannot operate on the mainnet at this moment. However, we are researching alternatives like Carbon and Ambient Finance. We used to be with Ambient Finance, and we see considerable potential with these platforms. Regarding feasibility, I can't say much at this time. It's much easier to understand the situation on the mainnet. Without a doubt, these platforms are excellent. It would be fantastic if we could forge a partnership with them. One more thing - we have a Telegram channel with Carbon Finance, and we're in discussion
We are currently focusing on the product side. At the very least, we need to have one profitable vault and achieve success. This requires us to conduct more research. Absolutely. We also need a good understanding of pair dynamics. Currently, we're only interacting with the Uniswap v3 ETH/USDC pair. This pair is one of the most significant ones, but we could look at more long tail pairs where less toxic flow is occurring. Doing so can enhance the profitability of liquidity providers. Therefore, our immediate focus should be on the vaults and the strategy.
We can also considering start small-scale fundraising since we saw potentials in our strategies recently.
The token launch typically comes after the fundraising. So, we have certain prerequisites. First and foremost, we need a high-quality product. Once we have that, we can then build a robust ecosystem. So, a good product comes first.
Umeshu (The Honey Jar):
If you have any questions, feel free to join either Orange Finance's discord or Bera Land. If you have signed up for the Alpha launch, you'll have access to the Alpha launch channel on Orange Finance's database. This is a great platform to provide feedback, share your user experience, ask any questions, and get direct information from the team. Feel free to reach out to us directly on Twitter or Discord if you have any further questions.
Orange Finance is an Automatic Liquidity-Management protocol for concentrated liquidity-type DEXes such as Uniswap v3, maximizing the capital efficiency of Uniswap v3 by maintaining an efficient price range through the use of statistical modeling and delta hedging strategies.
Additionally, Orange Finance operate Orange Lab which is Experimental Stage allowing depositors and developers to test their hypotheses with limited amount.
Effortless Liquidity Management on LPDfi protocols
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