Announcing new insurance against Pangolin, PancakeSwap & Uniswap Impermanent Loss
Use DSLA to hedge against AMM / DEX market risks
Dear DSLA champions and cryptocurrency community, following our unveil of NFT Impermanent loss Agreements, the DSLA core development team is proud to announce that we will be adding AMM Impermanent Loss Agreements to the list of service level agreements available in DSLA Protocol! 🎉
This new type of agreement will enable Pangolin, PancakeSwap and Uniswap liquidity providers to offset their Impermanent Loss, while mining rewards to anyone pooling funds in an agreement.
Uniswap recently crossing $1B in daily volume, and with increasingly more decentralized exchanges providing a competitive, reliable alternative to centralized cryptocurrency exchanges. It goes without saying that Automated Market Marker (AMM) protocols has empowered both core development teams seeking a home for their asset, and cryptocurrency holders around the world, with an unprecedented level of access to the market.
But without a risk management vehicle to reduce Liquidity Providers exposure to AMM market risks, AMM services will increasingly struggle to convince Liquidity Providers to pool cryptocurrency instead of simpling holding assets in their wallet, using staking and delegation savings accounts, or through other DeFi means to generate yield.
The DSLA core development team is very excited by the upcoming release, and we cannot wait to share more about our Uniswap, PancakeSwap and Pangolin integrations and overall AMM strategy.
AMM and Risk: What is Impermanent Loss?
Assuming you add liquidity to a 50/50 AMM pool, Impermanent Loss happens when the value of your LP tokens, ends up being less than simply holding the underlying assets of your pool.
In short, AMM Impermanent Loss is a byproduct of the volatility of your pool’s assets.
DSLA Protocol fixes this
By signing a DSLA contract, Liquidity Providers agree on sanctioning Impermanent Loss, and on rewarding stability and growth, for a set period of time.
To activate an agreement, both parties need to put money when their mouth is, by staking DSLA, USDC or DAI to the DSLA contract liquidity pool.
When a AMM Impermanent Loss Agreement is active, DSLA Protocol monitors the price AMM pool underlying assets (e.g. the price of AVAX, and the price of DSLA, for a AVAX/DSLA pool on Pangolin).
If the calculated Impermanent Loss stays within the thresholds of the agreement, DSLA Liquidity Providers earn the right to claim a reward, by depleting the coverage stake of AMM Liquidity Providers.
Conversely, whenever an agreement is violated, AMM Liquidity Providers earn the right to claim a compensation, by depleting the upfront commitment of DSLA Liquidity Providers.
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About DSLA Protocol
DSLA Protocol is a risk management framework that enables infrastructure operators and developers to reduce their users exposure to service delays, interruptions and financial losses, using self-executing service level agreements, bonus-malus insurance policies, and crowdfunded liquidity pools.
DSLA Protocol’s flagship use case is to offset the financial losses of Proof-of-Stake delegators and DeFi users, while incentivizing the connectivity, performance and availability of staking pool operators and DeFi service providers.