January 04, 2021
LVL is excited to share something we’ve been working on for almost two years. Yield Farming is now available on the LVL App.
At LVL, we live by the code that Bitcoin is free. First we removed fees, then we put spread profits in the hands of our users. Now, we’re giving users control over liquidity. Yield Farming allows our users to earn a potential profit while providing Bitcoin liquidity to the rest of the community.
When we launched Autopilot, our goal was to bring market making technology, previously only available to whales and high volume traders, to all of our users. In our original whitepaper, we explored an Automated Marking Making (AMM) algorithm that could place buys and sells automatically on our customers’ behalf. Our hypothesis was that by making everyone a market maker, liquidity and marketplace health could meet or exceed traditional exchanges. We allowed users to control two parameters, spread and give, that would help keep inventories balanced while keeping posted liquidity high.
With the explosion of Decentralized Finance (DeFi), we reevaluated our approach to AMM. We asked ourselves what worked about our AMM v1 and what didn’t? Returns were great and we met our mission of having LVL’s own users be the sole providers of liquidity. Our algorithm was prone to occasionally selling out of Bitcoin. We believe that selling Bitcoin to our customers doesn’t fit our transparent ethos. In fact, the idea of selling directly to customers never even crossed our mind. Instead, we created a new algorithm designed to keep stable liquidity while continuing to keep spread profits where they belong: with our customers.
In our new whitepaper, we set out to limit sellout periods while maintaining good market balance while, crucially, keeping the profits in the hands of our users. By implementing ideas from Constant Function Pricing Models, we were able to rewrite the algorithm such that frequency of liquidity outages are reduced and eventually eliminated while providing potential profits to users who place funds in the liquidity pool. But enough of that dry, mathy mumbo jumbo. Go read the paper for an in depth analysis of the formulas.
With the release of Yield Farming, you’ll find an overhauled Autopilot interface. We have always envisioned Autopilot as the home for all of your automated services. Yield Farming is just the tip of a large automatic iceberg. (Here’s a little inside baseball: keep your eyes open for Dollar Cost Averaging coming very early next year!)
To activate Yield Farming:
We designed Yield Farming to improve liquidity on LVL by aligning incentives between Autopilot users, market order users, and arbitrageurs. This is similar to how Uniswap and Coinbase create incentives for people to provide liquidity on their platforms with one major difference: LVL isn’t part of the equation. We’re committed to keeping LVL free to use with no hidden fees or spreads. That’s why 100% of profit earned providing liquidity on LVL goes to Autopilot users.
Yield Farming is available now through Autopilot.
Stay safe and Happy Holidays to you and your family.
Yield Farming is an investment strategy that involves a risk of loss.