BrownFi builds a novel AMM with high capital efficiency and simple UX to unlock deep liquidity and high capital efficiency on ICP, a very new and emerging layer-1 ecosystem.
Problems
- Uniswap v2 is simple but low Capital Efficiency (CE)
- Uniswap v3 has high CE but complicated UX for LPs which is not suitable for retails.
Solution (a novel AMM - Elastic PLOB)
We invent a novel price discovery mechanism, namely, Elastic PLOB to tailor CE & market making, while keeping simple UX, fungibility & reusability of LP tokens of Uniswap v2. PLOB stands for Parameterized Limit Order-Book, which inspires BrownFi model.
BrownFi proposes a novel AMM model, where LPs allocate their liquidity into the pool according to a bonding curve that mimics the general shape of a traditional limit orderbook (LOB). We introduce a novel concept, Elastic Factor, to allow the liquidity concentration of the AMM to be automatically adjusted surrounding market price according to the relative trading size. This elasticity ensures unbounded liquidity, thus the pool never runs out of liquidity regardless of the trading size.
Mathematically, we prove that our general Elastic model covers the constant-product market making (CPMM) model xy=k, i.e. CPMM of Uniswap V2 is a special case of BrownFi’s elastic PLOB model. More importantly, BrownFi opens a new way to create arbitrary AMM with customized local orderbook shape around the market price as well as tailored liquidity concentration, or market marking strategies corresponding with market volatility prediction.
Note: loss-versus-rebalancing (LVR) is an important problem among Nakamoto challenges proposed by A16Z. BrownFi Elastic PLOB model is a response to the problem.
Research, Simulation
BrownFi is based on rigorous mathematical finance studies of our team. We’ve conducted research for years with mathematical formalization & verification on AMM models under the view of traditional finance.
Originality: BrownFi’s published Research Paper
By a simulation setting, we show that BrownFi has high CE as Uniswap V3 and hundred-folds higher than Uniswap V2.
Contact us
Telegram: @paven86
Visit BrownFi AMM pitchdeck