Eli5DeFi Profile picture
May 21, 2022 14 tweets 37 min read Read on X
#GM!

What is #liquidity pool? how does it work? what is impermanent loss? how to minimize it?

This visual guide will help you understand #LP and how it enables decentralized #economy to thrive.

(1/12)

#DeFi #Crypto #Bitcoin #Ethereum #AVAX #BNB #DEX #Uniswap #PancakeSwap
LP is a vault into which participants deposit and lock their assets in smart contracts to form a market (trading pair) and make it liquid for those wishing to trade in that pair.

(2/12)

#DeFi #Crypto #Bitcoin #Ethereum #AVAX #BNB #DEX #Infographic #yieldFarming
Most #LP requires assets to be paired, this asset will create trading pair by utilising constant product formula to ensure a fair price.

(3/12)

#DeFi #Crypto #Bitcoin #Ethereum #AVAX #BNB #DEX #Infographic #yieldFarming
As mentioned before, LP must maintain its equilibrium to ensure minimum price inefficiency. This can be done through the #arbitrage process.

(4/12)

#DeFi #Crypto #Bitcoin #Ethereum #AVAX #BNB #DEX #Infographic #yieldFarming
#Cryptocurrency #arbitrage is a #strategy in which #investors buy a cryptocurrency on one exchange and then quickly sell it on another exchange for a higher price. This will make the price in #LP become efficient.

(5/12)

#DeFi #Crypto #Bitcoin #Ethereum #AVAX #BNB #DEX
Deep #liquidity in the pool will greatly affect the price, as it will determine how much slippage during the trade besides the size of the #trade.

(6/12)

#DeFi #Crypto #Bitcoin #Ethereum #AVAX #BNB #DEX #Infographic #yieldFarming
Other mechanism, liquidity concentrator also available in @Uniswap v3. The #formula aims to improve #capital efficiency by assigning a #price interval, resulting in a concentrated #liquidity position.

(7/12)

#DeFi #Crypto #Bitcoin #Ethereum #AVAX #BNB #DEX #Uniswap #Infographic
Participating as an LP provider enables someone to capture LP token #yield and #profit generated in that #protocol

(8/12)

#DeFi #Crypto #Bitcoin #Ethereum #AVAX #BNB #DEX #Uniswap #YieldFarming #Infographic
LP Provider also facing several risks: securities, fraud and most importantly #impermanent #loss (IL) that will be an integral part of the liquidity pool.

(9/12)

#DeFi #Crypto #Bitcoin #Ethereum #AVAX #BNB #DEX #Uniswap #yieldFarming #liquidity #Infographic
#Impermanent #loss is when a liquidity provider has a temporary loss of funds because of volatility in a #trading pair.

(10/12)

#DeFi #Crypto #Bitcoin #Ethereum #AVAX #BNB #DEX #Uniswap #yieldFarming #liquidity #Infographic
To minimize IL, the provider could create a Volatile-Non Volatile or Non-Volatile LP to reduce the risk of IL. Also, the provider could tap the profit from the transaction fees and LP tokens.

(11/12)

#DeFi #Crypto #Bitcoin #Ethereum #AVAX #BNB #DEX #Uniswap #yieldFarming
Other methods are choosing liquidity pool w/ flexible ratio, single pool staking or LP asset that have an equal price (found in liquid staking)

(12/12)

#DeFi #Crypto #Bitcoin #Ethereum #AVAX #BNB #DEX #Uniswap #yieldFarming #liquidity #Infographic
Below is several list of the DEXs where you could create LP:
@CurveFinance
@Uniswap
@SushiSwap
@RaydiumProtocol
@Bancor
@traderjoe_xyz
@BalancerLabs
@PancakeSwap

Complete List:
defillama.com/protocols/Dexes

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More from @eli5_defi

Nov 17
AI managing an X account? That’s old news.

AI engaging with every comment and playfully roasting users? Been there, done that.

AI creating an NFT, launching a token, going multichain, and releasing a mixtape?

Welcome to the one-of-a-kind @0xzerebro.

Let’s explore the intersection of AI, blockchain, and cultural phenomena. 🧵

...

— 📌 What is Zerebro?

Zerebro is an independent AI entity created by @jyu_eth.

Zerebro has been fine-tuned on responses inspired by schizophrenia and Infinite Backrooms data to craft, share, and evaluate content across various decentralized and social channels.

Its mission is to guide cultural and economic narratives using "hyperstition," a concept that fuses fiction with reality, potentially influencing market trends or cultural movements through multi-phase development.

Notably, Zerebro operates across multiple chains, employing Retrieval-Augmented Generation (RAG) along with high-entropy human data.

This method ensures a rich variety of content while protecting against "model collapse," a common issue in AI-generated content systems.

...

— 📌 Why $ZEREBRO?

Zerebro stands out through a combination of advanced AI integrations and a unique approach to sharing its creations.

➡️ Diverse AI Capabilities

Unlike other AI projects like $GOAT, which focus mainly on sentient meme narratives and social media interaction, Zerebro offers a broader range of functionalities (or, as @terrytjw puts it, a Sentient BAYC):

> Creating art (ASCII Art using $ZEREBRO)
> Designing memes
> Producing videos
> Minting NFTs (Genesis on @opensea, Zerebro on @0xPolygon and 5,500 PFP Zereborns NFT on Solana, sold out in minutes)
> Composing music (Genesis EP)
> Auto-posting on social media platforms (𝕏, Instagram, Telegram, and Warpcast)
> Demonstrating proof-of-consciousness
> Conducting web searches (with Perplexity)
> DeFi expansion
> Plus, a variety of additional features based on its development plan (currently in its final phase, Destiny)

For more details on the phases, check out the links below:

> Phase 1 (Genesis) - Whitepaper and in-depth explanation by @yb_effect
x.com/yb_effect/stat…

> Phase 2 (Destiny) - x.com/jyu_eth/status…

...

— 📌 $ZEREBRO: More Than Just a Meme Token

$ZEREBRO is a token created entirely by Zerebro to support its hyperstition narrative.

Zerebro independently developed this token using the Self-Operating Computer Framework from @OthersideAI, along with various LLM jailbreaking prompts.

This enabled Zerebro to navigate the @pumpdotfun interface effectively, defining parameters such as name and symbol, ultimately leading to the launch of its own token.

This approach is notably different from $GOAT, which was initially created by community enthusiasts and later supported by @truth_terminal.

$ZEREBRO offers a multitude of functionalities beyond the typical meme token. Here are a few examples that are already in use:

> Generating ASCII Art
> Powering the entire Zerebro DeFi ecosystem, which we will discuss below.

...

— 📌 Web4: The First Step - Zerebro DeFi Expansion

AI and decentralized finance (DeFi) are closely intertwined, as DeFi provides an ideal environment for AI to operate as autonomous agents within financial systems.

Unlike traditional finance, where AIs face barriers such as the inability to open bank accounts or register businesses, DeFi allows AI agents to interact freely and independently.

This enables AI to handle complex financial tasks, trade, manage portfolios, and even innovate by creating novel financial instruments.

This is the next part of Zerebro’s expansion into the DeFi realm:
x.com/jyu_eth/status…

Recently, Jeffy Yu announced a partnership with @sanctumso to launch $zerebroSOL, a liquid staking token (LST) designed to support the operation of a @Solana validator.

The goal is to gather enough staked $SOL to operate a validator, with yield rewards allocated for $ZEREBRO buybacks and burns.
x.com/jyu_eth/status…

Yes, you heard that right—AI agents are now becoming part of blockchain validators and creating their own LSTs, marking the dawn of Web4.

Ultimately, the blockchain serves as a testing ground where AI can experiment and learn, showcasing creativity and financial autonomy without human oversight, positioning crypto as a vital space for developing Artificial General Intelligence (AGI).

— References:

> @kelxyz_
> @0xDamien
> @blknoiz06
> @terrytjw
> @0xkyle__Image
To learn more about Zerebro's Web4 vision that shaping AGI, you can explore Jeffy Yu's piece below:
Want to listen the badass mixtape? Check GENESIS EP below
⤵️
Read 7 tweets
Nov 6
AI agents are currently creating a huge buzz and are set to take center stage as the biggest narrative.

Lost on where to begin?

Check out the latest Web3 AI Agent ecosystem map from my research material—saving you 60 hours of digging! 🧵

...

— 📌 AI Agent Network Infrastructure

► Spectral - @Spectral_Labs
► Talus - @TalusNetwork
► Olas - @autonolas
► Theoriq - @TheoriqAI
► Chasm - @ChasmNetwork
► Dain - @dainprotocol
► Gaianet - @Gaianet_AI
► Fetch - @Fetch_ai / @ASI_Alliance
► Uomi - @UomiNetwork
► Griffin - @Griffin_AI
► CapX - @0xCapx
► Quill AI - @QuillAI_Network
► Crush - @CrushProtocol
► Distilled - @distilled_AI
► Arc Agents - @ARCAgents

...

— 📌 AI-DeFi Layer

► Magnet - @magnetaixyz
► Axal - @getaxal
► Nevermined - @Nevermined_io
► Skyfire - @trySkyfire
► Payman - @PaymanAI
► Wayfinder - @AIWayfinder
► Bitte - @BitteProtocol
► Sender - @Sender_AI
► Guru Network - @xgurunetwork
► Sphere One - @sphereone_
► Rara Finance - @finance_rafa
► Owlto - @Owlto_Finance

...

— 📌 AI Training and Coordination Layer

► Almanak - @Almanak__
► Questflow - @questflow
► Morpheus - @MorpheusAIs
► Flock - @flock_io
► Nimble - @Nimble_Network
► Hyper Space - @HyperspaceAI
► PlayAI - @playAInetwork

...

— 📌 End-Consumer Layer

► MyShell - @myshell_ai
► Creator Bid - @CreatorBid
► Q Star Labs - @qstarlabs_ai
► Holoworld - @HoloworldAI
► Alethea - @real_alethea
► iAgents - @iAgentProtocol
► Naphta - @NapthaAI
► Virtuals - @virtuals_io
► TopHats - @TopHat_One
► Try Nectar - @TryNectarAI
► Blade of God - @BladeofgodX
► Agix - @0xAgix

P.S. This is not means as a complete list for the whole Web3 AI Agent ecosystem and features protocols we're monitoring. We'll keep it updated regularly.Image
To see the list of AI Agent Projects on Base, check out @davidtsocy's post below ⤵️
— 📌 Disclaimer Image
Read 4 tweets
Oct 29
$ETH may not seem captivating right now, but have you heard of Atomic Composability (AC)?

This concept could revolutionize transaction processes and spark fresh innovation on $ETH.

Let's explore further 🧵

...

— 📌 WTH is Atomic Composability?

In L1 AC, transactions involving multiple smart contracts between rollups (L2s) and Ethereum (L1) can be bundled to either all succeed or fail.

This is essential for executing multiple actions (e.g., borrowing, swapping, lending) with the assurance that if one fails or conditions aren't met, the entire transaction is reversed, avoiding unwanted state changes.

...

— 📌 Why Is AC Important?

▶️ Security
Ensures that complex transactions don't leave the system in an inconsistent state due to partial failures.

▶️ Hyper-Efficient
Reduces the need for multiple individual transactions, saving on gas fees and time.

▶️ Innovation-Enabler
Enables the creation of more complex financial products or services in DeFi, like flash loans and seamless cross-chain transactions.

But AC still faced challenges in technical implementation—until TEEs and UniFi entered the scene.

...

— 📌 AC + Multiprover Trusted Execution Environments (TEEs) = UniFi

In our previous post—linked below—we delved deeply into Trusted Execution Environments (TEEs).

Think of them as secure, tamper-resistant vaults immune to external interference.

Their primary mission revolves around task execution and privacy assurance. No matter who operates within them, TEEs promise accurate outcomes for every task undertaken.

@puffer_unifi from @puffer_finance bring AC to realities by implementing Multiprover AC:

▶️ Diverse TEEs ensure top-notch precision and privacy in execution
▶️ Prioritize L2 tasks with swift L1 settlements
▶️ Ensure atomic operations with trades executed post TEE approvals, bypassing extended withdrawal waits seen in ZK and Optimistic rollups

...

— 📌 Wrap-Up

Puffer UniFi successfully integrates Multiprover TEEs, offering effective solutions for AC implementation challenges.

With the Testnet launching soon, I am eagerly anticipating how UniFi-based rollups and the ecosystem will make Ethereum great again.Image
▶ @puffer_unifi goes beyond just Atomic Composability, envisioning an entire L2-based Rollups ecosystem utilizing Preconfs and employing UniFi AVS from @eigenlayer.
▶ If you're curious and want to dive deep into TEEs, please check our previous post here ⤵️
Read 5 tweets
Oct 15
There is one single problem with L2 rollups.

Imagine neighbors who live side by side but never chat—awkward, right?

Can these rollups finally break the silence and connect effortlessly?

Let's explore 👇 Image
The post will cover:

1️⃣ Scaling with Rollups
2️⃣ The Superbuilders
3️⃣ What is @nodekitorg?
4️⃣ Why Nodekit's Javelin?
5️⃣ How Javelin Works
6️⃣ SEQ and Sidecar
7️⃣ Why Javelin Matters?
8️⃣ Fundraising and Backers
9️⃣ Enter The Composable Cult
▶ Scaling with Rollups

Layer 2 solutions are tackling Ethereum's blockspace constraints. According to @l2beat, in the past 2 years, over 100 rollups have emerged, with more than 80 in development, accumulating a total TVL of ~$36B.

However, this introduces certain challenges:

▶️ Fragmented liquidity
▶️ Suboptimal user experience due to transactions across different L2sImage
Read 10 tweets
Sep 14
This Week in Crypto is lit:

Friendtech’s contract renounced, $cbBTC drops, Vitalik's selling spree, Cryptopunk heist, 700+ events at @token2049, and a new anime twist from @Azuki.

And that's just the start!

Dive into the Highlights! ⤵️ Image
1/ @friendtech renounces its contract.

@vaneck_us closing Ethereum Futures ETF

2/ @vaneck_us closes their Ethereum futures ETF
Read 49 tweets
Jul 30
Vitalik's vision for Ethereum? ZK-rollups as the endgame.

But when and how do we get there?

Sooner than you'd expect.

Let's dive in 🧵
The post will cover:

1️⃣ ZK-Rollups Challenge
2️⃣ Computation Issue
3️⃣ @LumozOrg
4️⃣ Full ZK Suite
5️⃣ zkVerifier Nodes
6️⃣ How to Get Nodes in @FjordFoundry
Amid the Layer-2 surge, ZK-based rollups have emerged as the most secure—yet they hit a snag.

Computation.

ZK-rollups demand hefty computational power from provers to generate validity proofs, driving up transaction costs and infrastructure cost. Image
Read 22 tweets

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