Integrated Liquidity Markets (ILMs)
Greater capital efficiency, continual rebalancing, and a seamless user experience.
Last updated
Greater capital efficiency, continual rebalancing, and a seamless user experience.
Last updated
Integrated Liquidity Markets (ILMs) are an innovative approach to make borrowing more capital efficient across DeFi. ILMs are automated growth strategies that leverage a user's collateral to execute a specific pre-determined strategy i.e. looping. Additional ILMs can be easily spun up and new ILM strategies and markets can be proposed through the Seamless governance process.
A key focus for ILMs is making it simple and seamless for users to get started, automating any borrow/swaps for looping assets. To illustrate, let’s take a look at one of the first ILM strategies, the 3x leveraged wstETH/ETH looping strategy. Here’s how it works:
A user deposits wstETH into the ILM and receives an LP Token signifying their position in the strategy.
ETH is borrowed from the supply side of the Seamless Protocol lending & borrowing markets.
This borrowed ETH is swapped into a concentrated liquidity pool for additional wstETH, achieving a 3x leveraged ratio.
wstETH staking fee rewards generated through this strategy are greater than the cost of borrowing ETH. This leads to the end user earning more staking rewards from this strategy vs simply holding wstETH
Since ILM participants receive an LP token signifying their position in the strategy, ILMs are effectively tokenized. Imagine the possibilities of how this can bring additional utility to ILMs moving forward. Collateral for lending? Swapping for other tokens? The list goes on, this is just the beginning.
ILMs are liquidationless. When executing a DeFi strategy that involves lending/borrowing of other assets, users need to be mindful of their health factor and liquidation risk. If values of collateral change, a user may be liquidated to repay any loans that they’ve taken out.
Due to the automated aspect of ILMs, users do not need to worry about these fluctuations and therefore do not need to actively manage their position. With ILMs there are targeted leverage ratios, and whenever collateral fluctuates to deviate from those targets, ILMs automatically rebalance themselves aka buy/sell collateral to avoid liquidations and stay within their leverage bands.
On top of this, Seamless Protocol does not charge a streaming or management fee to execute ILM strategies. Other platforms charge their users to use these automated strategies, but Seamless believes in a transparent fee structure to ensure users maximize their profits.
Additionally, for yield related ILM strategies, any yield is auto-compounded back into the strategy leading to greater gains for users in the long run.
Auto Compounding - Baked into ILM logic is the concept of auto compounding. Gains earned from magnified staking fee rewards are incorporated back into a user's ILM position meaning gains compound right from the start.
Auto Rebalancing - Since ILM strategies are managed by smart contracts, rebalancing happens automatically, meaning users do not need to be actively managing their debt positions to stay within targeted leverage ratios.
No Hidden Fees - Fees of ILMs are distributed across all participants, lowering individual costs and not impacting a user's broader P/L performance.
High Efficiency - Borrowing strategies are added by the community and coded in smart contracts. Because ILMs are directly integrated with Seamless' lendable asset pool, the strategies utilize capital at preferential rates for more optimal returns.
Currently there are 6 ILM strategies live on Seamless Protocol
wstETH/ETH 3x Loop: Magnifies staking rewards from Lido Finance without introducing added price exposure.
ETH/USDC 1.5x Long: Increases the price exposure to ETH vs USDC price movements by 1.5x
ETH/USDC 3x Long: Increases the price exposure to ETH vs USDC price movements by 3.0x
cbBTC/USDC 1.5x Long: Increases the price exposure to cbBTC vs USDC price movements by 1.5x
cbBTC/USDC 3x Long: Increases the price exposure to cbBTC vs USDC price movements by 3.0x
USDC/ETH 1.5x Short: Increases short exposure to ETH by 1.5x
