Avalanche-oriented decentralised finance (DeFi) protocol Trader Joe has made the claim of founding a way to remove one of decentralised finance’s (DeFi) weakness which pertains to impermanent loss, as stated by Cointelegraph.
According to Cointelegraph, in a recently unveiled white paper called JOE v2 Liqudiity Book, authored by Quant developers and researchers such as Adam Sturges, TraderWaWa, Hanzo and software engineer Louis MeMyself, the developers showed use of Liquidity Book (LB) with use of an additional variable fee swap facility to provide zero or low slippage trades. Joe stated that the new strategy will reduce impermanent loss, as it has been one of DeFi’s drawbacks, which happens when the price of token fluctuates after one deposits in a liquidity pool-oriented market maker as part of yield farming.
On the basis of information by Cointelegraph, Thielen spoke on his firm and other institutional investors being less engaged with automated market makers (AMMs) due to risk of impermanent loss being high. According to the paper, Trader Joe’s Liquidity Book (LB) is a kind of liquidity pool (LP) which secures the liquidity of an asset pair into price bins, which are exchanged at a constant price. Trader Joe’s LB is expected to offer zero to low slippage trades to offer traders better buying rates. A recent study showed that over 50% of Uniswap v3 LPs lose money during market turbulence because of impermanent loss going over the swap fees.
Moreover, Cointelegraph reported that Thorchain is another DeFi protocol which ensures impermanent loss protection for LP deposits after a period of 1,000 days. Currently, the protocol is the largest decentralised exchange (DEX) on Avalanche, with $191 million in total value locked (TVL) on the protocol. Trader Joe’s token JOE saw its price going up for a brief period after the white paper release and was trading at $0.28 at the time of writing.
(With insights from Cointelegraph)
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