One undeniable fact is that DeFi farmers are profit chasers, always scanning the best high-yielding pools for return maximization. Accordingly, suitable, actionable, and easy-to-use analytics for DeFi liquidity providers should accessible. It is here where Revert Finance stands out.
The Rise of DeFi
To understand how Revert Finance works, one must first take a step back and appreciate how the sphere has grown.
As of writing on Mar 11, the Ethereum Decentralized Finance (DeFi) sub-sector currently locks over $40 billion of a range of digital assets.
Maker is the most dominant—and rightly so, being one of the oldest DeFi protocols on Ethereum. Other notable dApps in open finance include Compound, Aave, and Uniswap.
In this expansion, it is worth mentioning Uniswap and, specifically, decentralized exchanges (DEXes).
Uniswap is the world’s largest decentralized cryptocurrency exchange. It allows the trustless swapping of tokens without an intermediary.
On Mar 11, Uniswap is the fourth largest DeFi token by TVL, managing an astounding $4.18 billion.
AMM as a new Financial Tool in DeFi
Behind the success of Uniswap is its mode of exchange facilitation and integrated incentivization model.
Unlike centralized versions, Uniswap uses an Automated Market Making (AMM) model to enable users to trustlessly exchange tokens. Here, liquidity providers are rewarded for providing funds to a specific trading pool.
AMM is a unique financial tool in Ethereum and DeFi.
The incentivization for liquidity provision tackled initial problems that decentralized exchanges faced at the onset. Unlike centralized versions, which had market makers, DEXes relied on willing users who had in their possession tokens.
Creating liquidity pools and offering liquidity providers rewards for supplying assets to these pools democratized exchanges, opening up the sphere to anyone who had ERC-20 tokens and wanted to earn a return.
Tracking Liquidity Tokens
For each deposit asset in a pool, an equivalent amount of a liquidity provider token is automatically minted in AMM models.
Since one can be a liquidity provider in several pools, using the same liquidity provider tokens to stake and even earn more returns, it is imperative that a platform is availed for analytics and tracking reasons.
How Revert Finance Accounts for LP Tokens
Revert Finance provides an actionable analytics platform, specifically for DeFi liquidity providers. In the spirit of DeFi, they don’t need to create an account.
They can give analytics using streams from some leading DEXes, including Uniswap, Balancer, and more, for easy on-boarding. All users need to do is connect their account, approve, and view the movement of their LP tokens.
In Revert Finance’s perspective, the easiest way to count LP positions is to check a user’s account balance. However, this approach is naïve and doesn’t consider LP tokens staked in various contracts, earning rewards. At this point, they won’t reflect as part of the account balance.
Another way is to compute the LP tokens “minted” and “burned” when making deposits and withdrawals from a liquidity pool. This comes with a few errors, including disregard of LP tokens received from a different minter account. LP tokens would still appear as owned by the original minter account even if ownership has been relinquished.
Their solution to the first issue is to provide for a manual option for ignoring LP tokens in various contracts, earning rewards.
To address the second problem, they account for received LP transfers but differentiating them from transfers that might be from unstaking. They are currently working on this option.
What DeFi Users Can View from the Dashboard
From the main dashboard, Revert Finance displays the asset value’s LP positions in USD.
These are tokens owned by the account, calculated based on the amount of LP tokens and the underlying price of each token based on Coingecko’s prices. The Pool PNL is from fees accrued and price divergence.
Revert Finance also shows the sum of all staking rewards—both claimed and unclaimed, at the token’s current price and the available LP tokens.
From the analytics platform, a user also has access to the USD value of pool reserves and the USD value of the pool’s traded volume.