An overview of the Gamma Automated
With the introduction of concentrated liquidity on Uniswap V3, Quickswap V3, and other platforms, a need for concentrated liquidity managers (CLMs) has arisen.
Gamma's technology stack can offer the public non-custodial, automated, and active concentrated liquidity management services.
Providing liquidity to concentrated liquidity platforms is significantly more difficult than providing traditional liquidity because liquidity providers are required to provide liquidity at set price ranges. If the price of the underlying asset moves outside of the set price range, the LP no longer earns fees without re-adjusting the price ranges.
Concentated liquidity in action at Uniswap V3
For example, if a user provides liquidity for the ETH-USDT pair at a price range between $2,500 - $3,000, and the price of ETH rises above $3,000, the user will no longer earn fees.
The narrower the range that liquidity is provided, the greater the capital efficiency and the greater the yields the LP may earn. But, these tight ranges come with increased risk (impermanent loss)
Impermanent loss is the primary enemy of concentrated liquidity management and Gamma.
Impermanent loss happens when you provide liquidity to a liquidity pool, and the price of your deposited assets changes compared to the price at which you deposited them. The bigger this change is, the more you are exposed to impermanent loss. In this case, the loss means less dollar value at the time of withdrawal than at the time of deposit.
Concentrated liquidity platforms have significantly better capital efficiency and fee production, but they also can amplify the effects of impermanent loss.
Gamma's strategies attempt to mitigate impermanent loss through smart rebalancing, anticipating market conditions, evaluating metrics, and more.
Gamma's vault contracts automatically manage the price ranges, rebalance assets, and re-invest earned fees to generate yields optimally. This active approach is superior to a passive LP option.
Gamma Automated's vaults earn trading fees at a marked percentage (0.01%, 0.3%, 0.05%).
Users earn fees based on their proportional ownership of the pool, represented by LP tokens. If a user owns 15% of a pool that earned $1,000 in fees that day, they would be expected to earn about $150, minus deductions for GAMMA stakers and rebalance fees.
The Annual Percentage Returns (APRs) on the dashboard refer strictly to fee-based APR, the total fees earned as of the last compounding event divided by the current value of assets. They are currently set with a 24-hour lookback.
The APRs currently do not reflect impermanent losses or the change in valuations of the underlying assets.
Fees generated by a pool
Fees are auto-compounded in pools for greater returns and efficiency on rebalancing or compounding (ZeroBurn) events.
A percentage of fees are taken and provided to GAMMA stakers. This percentage can and will be variable, but currently is ten percent for most vaults. The fees are placed in a swap contract, exchanged for GAMMA on the open market, and distributed to GAMMA stakers.
Gamma Automated deposits are dual-sided. Users deposit assets directly in proportion to the assets in the pool. Gamma Automated vaults are rarely at 50-50 and can change rapidly with price changes. Therefore, users need to note when they enter and exit a vault.
Gamma Automated withdrawals are dual-sided. Users will receive assets directly in proportion to the assets in the pool, regardless of what the user originally deposited.
When providing liquidity into Gamma Automated's pools. Users will be given an ERC-20 LP token. These tokens and be used for a variety of special programs.
Gamma Automated offers internal (on the Gamma App) and external (on 3rd party sites) incentive programs for users. Guides to each liquidity mining program will be posted in the Guides section. The programs' terms, emissions rates, and mechanics are variable. Please consult each program for specifics.
Gamma's limited analytics suite shows basic ranges against price movement over time. We are continuously hoping to expand our internal and external analytics suites.