The Case for Lixir

Why you should, will and will want to keep using Lixir

Lixir Finance is a protocol focussed on automating and optimizing concentrated liquidity management. It is widely known that the older generation of Constant Function Market Makers (CFMMs), Uniswap V2 and the like, are very capital inefficient. Because they smear out liquidity over the entire possible price range of a pair (i.e. between 0 and ∞), only a small portion of all liquidity has a reasonable chance of being utilized at any given time. This capital inefficiency is what sparked the design of AMMs like Uniswap V3 and Trident, which will likely be followed by other DEXs. Uniswap V3 allows liquidity providers to provide liquidity in a tight range around the current price, but since the price of most assets is quite volatile, you're required to actively manage it to prevent liquidity from becoming inactive and incurring significant IL. The downsides of active manual management of concentrated liquidity positions however include

  • time & effort required to actively manage liquidity,

  • knowledge required to efficiently manage liquidity,

  • significant gas expenses for non-whales,

  • loss of fungibility (hence difficult to borrow against or integrate in 3rd party dApps),

while the upsides include

  • greatly improved liquidity conditions (with good management),

  • greatly increased profit through LP fees (with good management).

Lixir Finance was developed to make sure that anybody and any protocol would have access to the advantages of concentrated liquidity without having to accept the drawbacks. To achieve this, the protocol was designed to consist of multiple vaults, currently one per pair per DEX, and one keeper responsible for evaluating and adjusting each vault’s concentrated liquidity position. Through Lixir Vaults, liquidity providers now

  • enjoy automated concentrated liquidity management,

  • require no knowledge of efficient LP strategies,

  • significantly cut down on gas expenses by sharing gas,

  • receive fungible Lixir Vault tokens (tokens representing their deposited liquidity),

while the upsides remain intact.

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