Table of contents

1. What is LPDfi?

2. What problem does LDPfi solve?

3. The first 6 items in the LPDfi narrative

4. Personal experience

01 What is LPDFi?

LPDfi (Liquidity Derivatives Finance) is a financial derivative product that uses Uniswap V3 LP (CLAMM) to create Perpetual DEX, options, and money markets.

It helps liquidity providers earn higher fees by more efficiently utilizing LPs on Uniswap V3.

Advantages of LPDfi products:

For users, LPDfi provides more token incentives, reduces the risk of impermanent loss, and simplifies the provision of centralized liquidity, enabling them to earn higher returns in liquidity mining.

For Uniswap v3, the introduction of LPDfi means witnessing an increase in liquidity, user base, and trading volume, bringing more vitality and appeal to the platform.

For LPDfi itself, it solves the liquidity shortage problem of output products, creates a new liquidity layer for LPs at a reasonable cost, and enables Uniswap LPs to release unprecedented returns, marking the birth of a brand new asset market.

02 What problem does LDPfi solve?

The decentralized exchange (DEX) market is very vast. According to DeFiLlama, the total locked value (TVL) of Uniswap alone has reached $32.6 billion, and the total TVL of all DEXs has exceeded $118 billion.

LPDfi relies primarily on Uniswap, but there are other DEX protocols such as Curve, Balancer, and Velodrome with rich resources waiting to be developed and utilized.

Uniswap V3 has the potential to reduce impermanent loss, but it has not yet been fully utilized under current strategies.

While Uniswap V3 improves fund utilization, it also introduces some liquidity challenges. For example, users need to constantly manually adjust LP positions to avoid impermanent loss, which is a complex and time-consuming operation. In addition, some people try to buy options or futures contracts to protect their assets from price fluctuations, but this method is expensive and not necessarily effective.

However, with the advent of LPDfi, users do not need to manage liquidity themselves. They can trust the LPDfi project and protocol to automatically handle liquidity management to optimize profits and protect assets. This provides users with a more convenient option.

03 6 recommended projects of LPDFi Narrative

Logarithm

Logarithm, one of the more notable projects in the LSDFI narrative, discovered that the current temporary loss prevention measures are suboptimal for Uniswap V3.

This agreement allows users to:

Earn unlimited LP fees on Uniswap V3, maximize liquidity returns, and minimize price risk.

Hedge LP's risk of impermanent loss and ensure profits are maintained under various market conditions.

In addition to the above functions, LPDfi also provides the following two features:

Liquidity Shell: Maximize the profits of Logarithm users by properly allocating liquid assets on the LPDfi platform.

Nautilus Vault: Utilizes Delta-neutral strategy adjustments and reasonable liquid asset allocation to maximize profits.

Limitless

Limitless operates on the Uniswap V3 platform and provides a comprehensive solution for participants.

Additionally, Limitless has taken steps to maximize profits for Uniswap liquidity providers and address short-term impermanent loss issues.

KyberSwap

The third protocol introduced next is KyberSwap, which is built on KyberNetwork, a liquidity protocol running on the blockchain.

KyberSwap’s main goal is to provide the best price transactions by integrating multiple liquidity sources.

Dopex

Dopex is a project focused on options trading, which offers a range of related products.

The project is built on top of the Arbitrum ecosystem with the main goal of providing users with solutions that increase liquidity, reduce risk, and increase profits for options buyers.

Dopex uses a dual token model, including:

$DPX: This is the governance token, used for voting and sharing revenue.

$rDPX: A staking certificate whose value increases over time.

Options sellers and liquidity providers can earn DPX and rDPX tokens by staking their assets.

Dopex V2 will integrate Uni v3 liquidity and introduce American options, allowing contracts to be executed before expiration. This move will help option sellers and liquidity providers effectively manage impermanent loss, a risk management method commonly used by Uniswap V3 LPs.

Panoptic

Panoptic is another options trading protocol, similar to Dopex, but it is more focused on Perps options. On Panoptic, traders can trade long and short options, offering unlimited leverage up to 10x, just like going long or short on crypto assets.

Panoptic leverages Uniswap V3 LPs to provide liquidity to support buyers and sellers of options trading.

By providing this liquidity, Panoptic is able to earn commissions and share part of the profits with borrowers of assets in the Panoptic pool (usually used for liquidity providers on Uni V3). This model helps increase the sustainability of the Panoptic platform and provides additional potential gains for participants.

goodentrylabs

Good Entry is a position protection product designed to protect traders from liquidation during periods of significant or artificial market volatility.

It offers 10x leverage, is built on Uniswap V3, and utilizes an options-like mechanism.

When users deposit funds into ezVault, the protocol automatically allocates the liquidity provided on Uniswap optimally.

ezVault’s limited partners act as option sellers, while traders act as option buyers at a specific entry point (strike price). Remarkably, in just three months, ezVault has achieved the following:

795 Supplies

$1.3 million in total value locked (TVL)

4 main vaults ($WETH, $WBTC, $ARB, $GMX)

04 Personal experience

In the evolving DeFi market, different components are beginning to innovate. Among these developments and innovations, LPDfi is emerging as a potential player that could shape future hot narratives.

The LPDfi project uses options to address impermanent loss and simplify CLAMM's LP work, but ordinary DeFi users still face many challenges when using end products such as options trading or perpetual contract protection.

This may hinder the sustainable development trend of LPDfi, which may be more difficult than LSDfi.

LPDfi has the potential to simplify the user experience, improve capital efficiency, and accelerate emerging protocols. Although there are some challenges at present, as the DeFi community grows, solutions will emerge, ultimately improving the LPDfi model and strengthening its position in the financial sector.

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