Arrakis Finance Review: Powerful AMM Platform Built On Uniswap V3

Arrakis Finance automates liquidity management through on-chain and off-chain strategies. It allows liquidity providers to delegate liquidity management and share fee income. So what is this protocol, and how does it work? Is the SPICE token a potential airdrop? Let’s find out through the article below.

What is Arrakis Finance?

Arrakis Finance is a liquidity management protocol leading DeFi projects use to launch liquidity for their tokens on multiple blockchains. It is web3’s trustless market-making infrastructure protocol enables complex algorithmic strategies to be run on Uniswap V3. Liquidity providers can use Arrakis Vaults to manage their liquidity in an automated, capital-efficient, non-custodial, and transparent manner.

Some of the top DeFi projects that have adopted the Arrakis vault include Aave, MakerDAO, and Synthetix. At its peak in July 2022, the platform had a total locked value (TVL) of $206.54M.

What problem does Arrakis Finance solve?

Arrakis aims to address the tough spots that many projects in web3 are facing today. Traditional Uniswap v2 Automated Market Makers (AMMs) offer a one-size-fits-all liquidity solution. Although simple, they could be more efficient and affordable to subsidize liquidity schemes. Next-generation AMMs like Uniswap v3 offer liquidity efficiency improvements, however, at the expense of increased complexity and risk for liquidity providers (LPs).

The multi-chain landscape makes liquidity increasingly fragmented, and the operational costs to manage liquidity are exponentially higher. Projects are forced to devote unnecessary time and resources to complex topics such as active liquidity management, cross-chain liquidity provision, and spending modeling for market-making programs. Arrakis solves these problems by creating a regulated marketplace of new tokenized LP strategies to facilitate deep liquidity and optimize LP earnings.

Who can use Arrakis Finance?

Liquidity Providers (LPs)

Arrakis is a protocol that is built for liquidity providers that are either regular retail LPs, institutional funds or web3 protocols themselves to enjoy actively managed concentrated liquidity on Uniswap v3. LPs retain full custody over their funds and can withdraw at anytime.

They can select three different options that define how their liquidity gets managed:

1. Trustless Vaults: Vaults that have a smart contract with a pre-defined strategy as their manager, which enable LPs to have trustless, autonomously managed on-chain strategies, similar to a Curve v2 like model. These could be static or dynamic.
2. Managed Vaults: Vaults that are operated by professional market makers running more sophisticated off-chain strategies.
3. Self Managed Vaults: Vaults that can only be used by single entities which are also the manager at the same time and thus have full control over it. Only for advanced users.

Professional Market Makers (Managers)

The other possibility exists for market makers and sophisticated traders that can offer to manage the liquidity of other LPs in return for a % share of their fee earnings. All of this occurs on-chain, meaning that protocols can monitor how these market making strategies are performing transparently.

Products of Arrakis Finance

Arrakis Finance has two main products: V2 Protocol (an upgrade from the previous V1 version) and Leverage Protocol Automated Liquidity Management (Palm).

1. Arrakis V2

As a new generation AMM developed and enhanced from the previous V1 version, it is generally the project’s main product. The protocol will have the main features:

• Multi Position: allows projects to choose multiple liquidity positions in Uniswap V3, similar to Curve V2 in Uniswap V3.
• Cross-fee tier vaults: allow different fees in each liquidity pool.
• Impermanent loss (IL): minimizes temporary loss.
• Non-Custodial: deposited liquidity can be withdrawn at any time, funds will not be locked/monitored in pools.
• Fungible: ERC20 standard tokens can make them easy to integrate into DeFi.

In addition, the vault is a means of pooling many of the features of Arrakis V2 and a place where users can deposit liquidity into the protocol. There will be 2 features in the vault: depositor (Access), operator (Manager), and anyone can become a vault manager. There are two types of vaults:

• Private vault: only whitelisted addresses are allowed.
• Public vault: allow all.

Arrakis V2 will not charge users of the platform for free use, however, vault managers may charge a fee (depending on their requirements).

Since the launch of Arrakis V2, according to data from DeFillama TVL V2 is somewhat lower than the V1 version (before it). By March 27, 2023, also thanks to the explosion of the Arbitrum ecosystem, the Arrakis community has partly noticed, proving that the TVL level on Arrakis V2 has increased sharply from 2 million USD to more than 4 million USD (reaching 4 million USD). 93.72% in the last 7 days, according to Alpha Growth).

2. Protocol Automated Liquidity Management (PALM)

Is the first automated liquidity management protocol implemented on V2, allowing protocols and DAOs to create liquidity on Uniswap. PALM is independent of market conditions, can follow any price movement and is designed to solve 2 main problems:

• Inventory Acquisition: to liquidate governance tokens of Web3 protocols
• Automated Market Making (AMM)

Usage fee in PALM will be calculated as follows:

• Management fee: 1%/year
• Performance fee: 50%/ transaction fee from vault

Arrakis Finance Vaults

Prominent DeFi projects like Frax, Aave, MakerDAO, Olympus Pro, Synthetix and many more have used the Arrakis vault since the release of v1. Arrakis Vaults offers one of the largest collateral/liquidity positions for many of these protocols.

According to the documents from the platform, passively holding ERC-20 LP tokens in Arrakis vault effectively injects the LP into the underlying automated strategy. This drives bottom-up innovations in liquidity aggregation, like those seen on Uniswap v2 type AMMs (Liquidity Mining, Liquidity Owned by Protocol, and LP tokens as collateral). mortgage), in more efficient but also more complex markets such as Uniswap v3.

Furthermore, Arrakis paves the way for a new area of decentralized market innovation with the potential for tokenized products such as:

• Sophisticated multi-location on centralized AMMs
• Cross AMM positions
• Liquidity as a service strategy
• Cross-chain strategy
• The delta-neutral LP positions are automatically protected
• LP positions combined with the lending/borrowing or options market
• Cross-chain strategy

The ultimate goal of the protocol is to assemble, develop, and maintain best practices for providing efficient DEX liquidity, publicly available to anyone, and easy integration with the rest of DeFi. . In this way, Arrakis promotes deeper and more reliable liquidity for multiple projects and use cases across the web3 ecosystem.

SPICE Token

Arrakis Finance uses the $SPICE token to help it achieve its goal of decentralization. SPICE is airdropped to users in the Arrakis protocol and GEL holders on Gelato. This is also an encouraging activity of both founders for their community, led by Co-founder of Arrakis – Mr. Hilmar Maximilian Orth is also a co-founder of Gelato. Currently, the Arrakis docs do not mention SPICE and only have information on Twitter, so the token information will be missing.

SPICE Token Key Metric

• Token Name: Arrakis Finance
• Ticker: SPICE
• Blockchain: Ethereum
• Token Contract: Updating…
• Token Type: Utility, Governance
• Total Supply: 30,000,000 SPICE
• Circulating Supply: Updating…

SPICE Token Use Cases

SPICE token has the following use cases:

• Tokens are airdropped for users, projects, GEL locker
• SPICE is an integral part of the development of the ecosystem.
• The token is also used by the protocol to govern the community of Arrakis.

SPICE Token Allocation

Arrakis and Gelato just announced that they would airdrop to users with 3% (total supply of SPICE, expected to air to users in 2023). As of the time of writing (March 28, 2023), SPICE has not yet released details on the number of tokens allocated.

SPICE Token Sale

Arrakis Finance has not held a community token sale, possibly not. Instead, the tokens will be airdropped to users, projects, and people who lock GEL (on Gelato).

The GEL Lockdrop program launched in May 2022, a total of 30,000,000 SPICE tokens (3%/total supply) will be allocated for this program. The lock period starts on May 19, 2022, and counts down within 90 days (ends September 8, 2022). Airdrop is a SPICE token and is expected to be distributed in 2023.

How to Get the SPICE Airdrop?

The best chance to get the $SPICE airdrop is to provide liquidity on the Arrakis Vaults. The protocol is live on four mainnets: Ethereum, Polygon, Optimism, and Arbitrum. So you will need real funds to qualify for the $SPICE airdrop. Here’s a step-by-step guide:

1. Connect Your Wallet to Arrakis Finance: Connect your MetaMask or other supported wallets to the Arrakis Finance Vault page. Switch the network to Ethereum, Polygon, Optimism, or Arbitrum, depending on where your funds are located.
2. Provide Liquidity to Vault: Select a liquidity pool you want and deposit your token pairs. Each pool has different rewards and fee tiers.

If you want to minimize impermanent loss risk, stablecoin pair LPs are a safer choice.

Conclusion

The overall purpose of the Arrakis Finance protocol is to synthesize, develop and maintain best-in-class strategies to provide efficient, publicly accessible DEX liquidity to all and seamlessly composable with the rest of DeFi. By doing so, Arrakis adds deeper and more powerful liquidity to a multitude of projects and use cases across the web3 landscape. The Arrakis team confirmed on Discord that there would be a $SPICE airdrop. This could be one of the potential big airdrops, so keep an eye on the details on the project’s official pages so you don’t miss this opportunity.

Besides, the project also needs to face a number of similar projects in the same field, including: Uniswap V3, Convex Finance, Aura, Rari Capital, StakeDAO, Homora V2…

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

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