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Whats Archimedes? & Why V2 is a game changer!

Febuary 2024

What is Archimedes protocol?

Intro to Archimedes DeFi Services

BTC yield with no IL: You can bridge Between BTC and DeFi with Leveraged or non leveraged positions.

Protected Single Pools: Archimedes provides enhanced security for liquidity pools in popular DeFi protocols like Convex and Aura. This service includes protective measures that safeguard liquidity and enhance reward compounding.

Protected Omni-Pools (coming soon): Similar to the Protected Single Pools, Archimedes will offer Omni-Pools which allow for "set and forget" diversified investments. These pools dynamically allocate liquidity across various pools, balancing between APY and risk for optimised safety and performance.

veARCH Program: Archimedes introduces the veARCH program, encouraging early participation by offering special rewards post-beta, with additional utilities planned for the future.

Leverage (Upcoming): An upcoming feature that will enable users to amplify their capital and gains by leveraging preferred strategies on Convex and Aura. (something that I have exclusive information for and ill be covering)

Automated Portfolio Protection: Archimedes offers a hands-off approach to portfolio management, where users can select a strategy aligned with their risk appetite, open positions to accumulate ETH or USDC through high-yielding DeFi strategies, and enjoy peace of mind knowing their investments are protected.

Liquidity Protection: Users can grow their ETH or USDC holdings via top DeFi protocols like Convex and Aura, with the added benefit of Archimedes' protective measures.

Why would you use Archimedes over other liquidity pools?

Well the answer is simplicity, often liquidity provision takes a FAFF of approving transactions, choosing your range, changing if you are out of range and etc. There are so many things that make life hard.

Sustainable Leverage:

V2 Leverage is being revamped to become beneficial to all in the ecosystem as well as reducing the reliance on $ARCH emissions for the higher APR's. At its core it allows users to borrow assets and increase their positions thus increasing their returns.

Liquidity Provision on Archimedes for WBTC/lvBTC Curve Pool.

Understanding the Role of Liquidity Providers (LPs) in DeFi:

In DeFi, Liquidity Providers play a crucial role by depositing their assets into liquidity pools. These pools are essential for facilitating various financial activities, including lending and borrowing, within the DeFi ecosystem.

Process for LPs in Archimedes’ WBTC/lvBTC Curve Pool:

  1. Depositing Assets:

    • As an LP, your first step is to deposit WBTC into the WBTC/lvBTC pool on Curve.

    • This pool serves as the central source of funds that are borrowed and leveraged by Leveraged Traders (LTs).

    • Archimedes hints at expanding this model to new chains in the future, indicating a broadening of their services and supported assets.

  2. Earning Yields:

    • By providing your WBTC to the pool, you enable other users to borrow it.

    • In return for your contribution, you earn yields. These yields comprise fees and interest generated by the LTs who are leveraging the assets in the pool.

    • The specific mechanics of how these yields are calculated and distributed are likely detailed further in Archimedes’ documentation.

Key Takeaways for Potential LPs:

  • Investment Opportunity: Depositing WBTC into the WBTC/lvBTC pool on Curve via Archimedes presents an opportunity to earn yields while contributing to the liquidity of the DeFi market.

  • Dynamic Ecosystem: The mention of expanding to new chains suggests a growing and evolving ecosystem, potentially offering more diverse opportunities for LPs in the future.

  • Role in Leveraged Trading: Your deposited assets play a critical role in enabling leveraged trading activities, a significant aspect of DeFi’s innovative financial mechanisms.

Understanding the Role of Leverage Takers (LTs) in DeFi:

In decentralised finance (DeFi), Leverage Takers (LTs) borrow assets to invest in various strategies, effectively amplifying their investment capacity. This process involves a series of steps to ensure responsible and effective leverage taking.

Steps for LTs in Archimedes’ ETH/alETH Strategy:

  1. Providing Collateral:

    • LTs must first provide collateral in forms such as ETH, WETH, USDC, or WBTC.

    • The amount of leverage is determined by the collateral multiplied by the selected multiplier. This dictates the total amount of assets borrowed.

  2. Borrowing and Earning:

    • After selecting the collateral and multiplier, the borrow amount is displayed.

    • LTs then borrow, for instance, WBTC, which they swap for ETH/alETH to invest in the chosen strategy.

    • This process creates a short position in WBTC and a long position in ETH/alETH, meaning LTs are betting on the appreciation of ETH/alETH relative to WBTC.

  3. Cost of Liquidity and Profit Sharing:

    • It's important to understand that liquidity services aren't free.

    • To sustain the protocol, LTs share a portion of their profits.

    • A variable performance share is deducted from profits and distributed among WBTC depositors.

    • This performance share is dynamic and subject to changes proposed by Archimedes DAO.

Key Considerations for Potential LTs:

  • Strategic Borrowing: Understanding the dynamics of short and long positions is crucial. Borrowing and swapping to invest in strategies like ETH/alETH requires a comprehensive understanding of market trends and risks.

  • Profit Sharing Mechanism: The profit-sharing model is a critical aspect, ensuring sustainability for the protocol and fair compensation for liquidity providers.

  • DAO Governance: The role of Archimedes DAO in determining performance share percentages indicates a community-driven approach to protocol management.

This is where Archimedes thrives and beats its competition:

Understanding Single & Multi Pools in DeFi: In the world of decentralised finance (DeFi), providing liquidity to Automated Market Maker’s (AMM) pools is a common practice. However, it comes with risks like Impermanent Loss and Counterparty Risk. Archimedes’ Protected Single and Omni-Pools are designed to mitigate these risks.

  1. Impermanent Loss Explained: This occurs when the price of your deposited assets changes compared to when you deposited them. The larger the change, the bigger the loss.

  2. Counterparty Risk Explained: This involves the risk associated with the other party in a financial transaction not fulfilling their obligations. In DeFi, this could mean the risk of the other liquidity providers or the protocol itself.

Archimedes’ Protective Measures:

  • Diversified Liquidity: By ensuring that pool liquidity is spread across many addresses, Archimedes reduces the risk of market manipulation and increases stability.

  • Continuous Health Checks: Archimedes’ Guardrails constantly monitor each pool by performing Health Checks every block (i.e., constantly). These checks assess factors such as Pool Balance, Liquidity Depth/Total Value Locked (TVL), and the pool's share held by Archimedes’ Vault.

  • Responsive Action to Pool Health: If a pool is deemed “unhealthy” (based on predefined risk parameters), the Guardrails temporarily withdraw funds to safeguard them. These funds are redeposited once the pool is flagged as “healthy” again.

Advantages for Users:

  • Improved Risk/Reward Curve: Archimedes aims to provide the same yield for less risk by actively managing pool health.

  • Set and Forget Approach: Thanks to the continuous algorithmic monitoring and management, users can invest and not worry about daily fluctuations or managing their positions actively.

Improved capital efficiency:

  • Challenges Faced by LPs:

    1. Yield Management Complexity: LPs face the challenge of optimising the yield on their deposited assets. This involves decisions on claiming, swapping, and redepositing rewards to compound profits.

    2. Fluctuating APY: The value of the reward tokens can vary, affecting the APY LPs expect from their investments.

    3. Additional Costs: Each action requires a transaction, incurring gas fees, which can diminish overall profits.

    Archimedes’ Solution: Autocompounder for Improved Capital Efficiency:

    • Gas Fee Elimination: Archimedes Autocompounder removes the burden of gas fees for compounding rewards from LPs. Archimedes covers these costs.

    • Automated Compounding: The Autocompounder automatically compounds rewards, removing the need for LPs to constantly monitor and manage their positions for optimal compounding times.

    Benefits for Users:

    • Simplified Investment Management: LPs can invest without worrying about the intricacies of managing and compounding their rewards.

    • Enhanced Returns: By eliminating gas fees and optimising compounding frequency, the Autocompounder aims to maximise the efficiency of capital and potentially increase overall returns.

My personal take on Archimedes:

  • Would I use the protocol? - Yes but when it launches on L2's later in the year. I don't like spending high gas fees on mainnet. Im not a whale yet, hence the reason for mainnet as majority of big whales do defi there.. (check out their most recent twitter spaces about the migration to L2)

  • For new/intermediate users this would be a perfect project where you can get those more juicy yields with a more "protected" risk.

  • This is not another copy and paste protocol, it offers innovate solutions for BTC. Im really excited to see what comes out in the future and seeing new chains added.

  • If you a whale then this is a good protocol for you to chill with, this is a microcap project (for those who care) and and the end of the day you need to decide on yourself where you invest your money! - I've met the team and they are hella genuine and working hard to improve the system.

Disclaimer: This article is just for educational reasons and hoping to spread the word of this innovative projects!

More info:

Check out the archimedes Notion article for more about their leverage products (work in progress).

Twitter / Discord / GitHub / Whitepaper / Careers

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