Charm Finance

Challenges and Solution

Alpha Vault is the only solution that can capture Uniswap V3’s Capital Efficiency in a decentralized manner, without sacrificing security, user convenience and LP Returns.
The Challenges
Uniswap V3 provides better liquidity and higher Fee Income, but presents many challenges:
To achieve better liquidity:
  • Liquidity Managers will have to choose a new range whenever the price moves.
  • Liquidity Managers risk having no liquidity if tokens trading Out of Range.
  • Liquidity Providers have substantially higher risk of capital loss.
To incentivise liquidity provision:
  • Uniswap V3 positions cannot be used because they are not ERC-20.
  • Directly incentivising a Uniswap V3 pool risks economic exploits such as narrow-range LP Strategies.
What projects are doing now
Liquidity Management can be delegated to an active Liquidity Manager, but this introduces new challenges:
  • It is difficult to diagnose problems (eg large LP losses, low Fee Income, low Capital Efficiency, security incidences) because active Liquidity Managers do not open-source their LP Strategy.
  • The performance cannot be independently verified, because the underlying data is not on-chain.
  • It is not possible to decentralize, because project DAOs have no visibility on how the liquidity is being managed.
  • There is less choice and flexibility, because the number of vaults that can be managed is limited by the resources of the active Liquidity Manager.
  • Protocol fees are likely to be higher due to higher overheads.
The Solution
Alpha Vaults solves the above by building:
  • A permisison-less platform where anyone can create their own LP Vaults.
  • The easiest-to-use front-end to provide and manage liquidity.
And by testing:
  • Its LP strategy over many years on Mainnet, to ensure it can deliver excellent LP Returns and high Capital Efficiency.
  • Its infrastructure over many years on Mainnet, so that it is secure and reliable.
And by ensuring all vaults:
  • Are operated on-chain and verifiable by anyone.
  • Have fully transparent performance metrics using on-chain data.
  • Can be fully controlled by a DAO using an on-chain governance framework.
  • Have low protocol fees.
  • Are ECR-20 compliant so that they can be incentivised using familiar tools.