X3 is the best solution for zero impermanent loss and single asset yield farming for any assets including shit coins
At present, the solutions to impermanent loss mainly include the following: 1.Token compensation for impermanent losses, such as bancor 2.Impermanent loss insurance, such as Instaraise 3.Option to hedge impermanent losses, such as Opyn.
However, the above solutions have more or less some defects. The first solution by token compensation damages the interests of token holders, and it is difficulty to provide impermanent loss protection for all pools. The insurance and option to hedge IL always lack of market liquidity, and it makes it difficult for the buyer of the option to exit freely.
In order to hedge against the impermanent losses, we designed a contract system:
USDT Value of 1 Contract is sqrt(P)，
wherein P is the price of ETH. When the price of ETH to USDT is P0, a liquid mining user deposits x0 ETH and y0 USDT into the Uniswap fund pool ETH-USDT, and shorts 2y0/(P0)^.5 contracts in the contract trading system at the same time, in other words, there is short order of 2y0 USDT. When the price of ETH/USDT fluctuates to Pn:
Meet the following conditions in Uniswap:
The changes in the amount of USDT of this liquid mining user in Uniswap is
The changes in the amount of USDT of this liquid mining user in this contract trading system is
Then the net profit and loss of the liquid mining user for USDT is
It can be seen from the above, the impermanent loss of liquid mining users in Uniswap is zero by using the contract system designed by us for hedging, and it is equivalent to hold a single asset for liquidity mining. In order to further verify the feasibility of the above system, we selected the ETH/USDT data from February 15, 2020 to March 13, 2020 for back testing. A liquid mining user (market maker) made funds to Uniswap ETH-USDT on February 15, 2020. The equivalent of 1000 USDT is deposited in the pool. The figure below shows the change in the amount of USDT Vs Price in Uniswap and the contract trading system of the mining user. The price of ETH has dropped from 290 USDT to 85 USDT. If the liquidity market maker is only in Uniswap while making market, the USDT loss was as high as 43% during the period. But If he chooses to hedge in the contract trading system at the same time, the total USDT remained unchanged at $1,000, which indicates that the contract trading system can completely hedge the risk of impermanent loss of the automatic market making mechanism. It truly realizes the possibility of automatic market maker hedging and a single asset mining.
As shown in Figure below, we take the ETH/USDT data for the whole year of 2021 as an example. Assuming that the annualized rate of return of pair ETH-USD mining is 100%, the capital utilization rate in the X3 system is calculated at 50%. The actual loss of ETH for the whole year was -7.7% farming only in uniswap, while the amount of ETH in X3 stable increased by 42.8%, indicating that the X3 system can achieve stable income from single-sided farming.
As a result, we believe that X3 protocal will be a win-win for leveraged traders and farmers, one obtains a leveraged exposure of the underlying assets without the risk of liquidation and funding fees, and the other obtains stable returns without impermanent losses by single-sided AMM farming.
Until now there is no effective solution for impermanent loss(IL)，but X3 can achieve not only zero impermanent loss but also single asset yield farming. The project has been deployed on the Polygon testnet, everyone is welcome to test and give valuable comments.
Our future strategy
- Multi-chain layout
- Stablecoin development based on X3 protocol
- Building an independent AMM system combined with spot and derivatives
Official website: http://test.x3.finance/
Introduction Video: https://www.youtube.com/watch?v=w1aI2hgy6rQ
Telegram: https://t.me/x3_finance
One minute to start X3 protocol making money without impermanent loss: