# Why choose Pumpkin?

By [Pumpkin Protocol](https://paragraph.com/@pumpkin-protocol) · 2024-04-25

---

There are endless options for DeFi users when it comes to yield generation & trading - what can we offer that others can not?

In this article we will take an introductory look at the benefits **Pumpkin** offers for:

*   Liquidity Providers (LPs)
    
*   Traders
    
*   Projects
    

**Benefits for Liquidity Providers**

Pumpkin allows for single-sided liquidity provision, solving the issue of impermanent loss present in pair-based pools.

**Quick refresher on impermanent loss (IL)**

IL is a consequence of how assets are priced by Automated Market Makers such as Uniswap or Pancakeswap - prices are determined by comparing the balances of both tokens in a pool.

When you provide liquidity for a pair, say METIS/USDC and one of the paired tokens changes in price significantly, you can end up in a position where simply holding both assets, instead of providing liquidity, would have resulted in larger profit or lower loss compared to LPing and earning fees.

For a more detailed look at IL, read [this article.](https://academy.binance.com/en/articles/impermanent-loss-explained)

**Mitigation against impermanent loss leveraging LP positions**

Back to single-sided liquidity - Pumpkin does not have separate pools for individual pairs, but instead a virtual universal pool called the **Omnipool**, comprised of “tails” - which represent available liquidity for each individual asset in the Omnipool.

This allows users to provide just a single asset (ERC-20, LP token, yield-bearing, LRTs, etc)  to the pool - the protocol then lends the respective amount of **tPUMP**, a CDP-based synthetic tradeable asset, that gives instant liquidity to the user and allows them to leverage yield.-

**Pumpkin Stage-Rollout 1**

**How does it work with spNFTs? (or LP tokens)**

As stated above, **tPUMP** represents an underlying liquidity position within a CDP (short for _collateralized debt positio_n)

The user will be able to deposit liquidity pool positions from HerculesDEX, such as wMETIS-m.USDC, and mint tPUMP within Pumpkin.

**tPUMP** then allows the user to leverage yield by depositing into the tPUMP/PUMP liquidity pool in Hercules, and earn additional **METIS** yield on top of its already yield-accruing position. Hence, the user will be able to earn:

METIS\[wMETIS/m.USDC\]+METIS\[tPUMP/PUMP\]

On the other hand, the user will also be able to swap tPUMP for any liquid asset in the Hercules ecosystem.-

**Benefits for Traders - Stage-Rollout 2**

Token swaps through the Pumpkin Omnipool carry minimal slippage and fees, since there is no repeated swapping across multiple isolated pairs (multi-hops).

In pair-based pools, if a trader wanted to swap say $METIS for $USDT on Uniswap on Ethereum, the trade would be routed something like this:

*   $METIS > $WETH (swap fees & slippage apply)
    
*   $WETH > $USDC (swap fees & slippage apply)
    
*   $USDC > $USDT (swap fees and slippage apply)
    

In an Omnipool setting, the swap would look like this:

*   $METIS <> tPUMP <> $USDT (swap fees and slippage apply)
    

You can probably guess which one carries lower fees and slippage.

This minimization of hops along with the deeper liquidity even for very niche tokens within the Omnipool offers traders an unmatched experience in terms of swap fees and slippage.

**Benefits for Projects**

Treasury management is crucial to long term project success and sustainability, especially in DeFi.

Many teams are stuck in between a rock and hard place, with their treasuries consisting largely of their own project tokens, with no ability to sell on the open market without hurting their credibility and holder community.

So while many, especially early stage, projects seem well funded on paper - their actual runway is much shorter since only a fraction of their treasuries is held in stablecoins or majors.

Pumpkin’s single-sided liquidity offers a way to utilize large amounts of otherwise idle treasury funds to earn yield and fund operations without having to sell the native token.

By using their native treasury tokens to set up a tail for the Omnipool, projects not only establish a source of sustainable yield, they also deepen liquidity for their token and unlock the benefits for traders listed above for their own community.

_To answer the initial question of what we can offer - improvements upon existing DeFi infrastructure for liquidity providers, traders and projects alike._

This ambitious approach is our core mission and how we aim to establish Pumpkin as a key protocol on Metis and beyond.

---

*Originally published on [Pumpkin Protocol](https://paragraph.com/@pumpkin-protocol/why-choose-pumpkin)*