- Details — Measuring risk through simulations
- Next steps
- About the Uniswap Foundation Grants Program
- Related posts
Chaos Labs has been selected by the Uniswap Foundation to receive a grant that will enable delivering risk management solutions for Uniswap V3. Uniswap is the largest on-chain DEX in the world, transacting close to $1 Billion worth of assets in daily volume.
In this grant, we will create a simulation experience for users to test sophisticated LP strategies on Uniswap V3. Users will have access to on-chain simulations via a highly configurable CLI and a more simplified hosted dashboard.
Details — Measuring risk through simulations
The lack of tooling for sophisticated LP strategies has become a barrier to broader institutional adoption of Uniswap and limited the reach of automated market maker (AMM) pools in general. These investors need tooling that is flexible to their strategies and measures risk across market environments.
Chaos Labs will leverage this grant funding to build a CLI and hosted interface for market makers and traders to deploy and test sophisticated LP strategies.
The CLI will enable users to create simulations with parameters tailored exactly to their strategies, such as amount of capital invested, yield optimization levels, and slippage budgeting. Additionally, our hosted dashboard will provide users with an intuitive interface that displays the results of their simulations in easy-to-understand visuals.
The simulations are powered by our proprietary technology which uses data from public, on-chain Uniswap data along with off-chain analytics tools. Our algorithms decode data related to liquidity strategy and portfolio performance in order to identify potential risks associated with different strategies and markets.
Users will be able to simulate profitability and risk via tools utilizing back-testing techniques and customizable future price trajectories. The open-sourced framework will include strategy composition capabilities with blocks, such as:
- Comparing LP returns with baseline LVR strategy (an approach popularized by Tim Roughgarden)
- Hedging strategies targeted to keep position delta
- Built-in volatility and volume-based indicators (i.e., Bollinger bands, MACD, RSI, etc.)
We believe these features will be essential in bringing institutional investors into DeFi markets powered by automated market makers such as Uniswap.
We invite everyone to stay on the lookout for new updates on our progress and reach out with feedback or ideas! We will continue engaging the community further as we go along. As always, direct any questions or suggestions to us on Twitter.
About the Uniswap Foundation Grants Program
- Uniswap V3 TWAP oracle deep dive pt. 2 (May 28, 2022)
- Uniswap V3 TWAP oracle tooling and deep dive pt. 1 (March 21, 2022)