🆕Today we’re excited to introduce our submission for @ETHGlobal hackathon: Pool Pipes!
🚰Pool pipes seamlessly re-balance liquidity between pools to save time & help reduce liquidity fragmentation in DeFi: https://t.co/ydtlg27B1A
ℹ️How does it work? Let's explore some use cases: pic.twitter.com/10onABcvbS
— Zapper.fi (@zapper_fi) May 25, 2020
For those who missed it, Zapper is the newly created company spawned out of a merger between DeFiZap and DeFiSnap – two grassroots DeFi projects aimed at creating an intuitive, holistic experience for nontechnical users.
Today, we’ve seen another strong addition to the Zapper stack with Pool Pipes – a new tool aiding in liquidity fragmentation by allowing any users to go to and from different liquidity opportunities in a single click. Here’s an awesome overview of the hackathon submission.
Why Does This Matter?
For anyone who’s supplied liquidity to one of DeFi’s endless capital pools, you’ve surely experienced the time and hassle of having to exit a pool, swap that collateral and enter the new pool with the proper components.
Now, with Pool Pipes, users can handle this whole process natively through the Zapper dashboard, letting you go between Uniswap V2 to Curve, Balancer, and dozens of other liquidity protocols (like FutureSwap and Shell) that are set to come online in the coming months.
Best exemplified by Synthetix and their recent liquidity incentive adjustments, Pool Pipes can be used to rebalance sETH Unipool tokens to sUSD Curve tokens from 4 transactions into one. While all you see on your end is a new position on the dashboard, there’s quite a lot going on under the hood – all of which is aimed at limiting gas costs and slippage to get you the best bang for your buck.
Taking this concept a step further, Zapper can be programmatically adjusted to meet your investment criteria, triggering rebalances and liquidity transfers as ceratin criteria like incentives, pool size, and pool share are reached. Here’s a look at a number of Pool Pipe contracts that are set to go live today.
To take advantage of Pool Pipes, head on over to Zapper’s “Invest” tab and look for the Rebalance button. From here, users can select an existing pool they have a position in and which supported pool that liquidity should be transferred to. At the time of writing, only Uniswap V1 and Curve are supported, but we expect this to include Balancer and Uniswap V2 in a matter of days.
Seeing as each Pool Pipe is unique, Zapper encourages other developers to build their own Pipes, effectively aiming to solve the wider DeFi liquidity fragmentation issue in which this feature was created for.
What is Liquidity Fragmentation?
While there are dozens of ways users can swap tokens within the DeFi ecosystem, many of these pools are fragmented from one another. While we’ve seen a strong trend of DEX aggregators emerging to find users the best price point, it fails to solve the underlying issue of liquidity silos.
Building on the notion of composability, it seems inevitable that all of DeFi will become ever-connected, allowing users to access ecosystem-wide liquidity pools rather than having to draw from each individual protocol or product. While this idea certainly raises some concerns regarding attack vectors, Zappers approach is without a doubt the right starting point.
By focusing on protocols that have proven their worth in the wild, these new contracts serve as intuitive bridges to allow for liquidity to be migrated in a seamless fashion – especially for those who may otherwise not have been aware of new pools that commonly offer better returns to early adopters.
Tying this back to Zapper’s core mission of aiding in DeFi accessibility, features like Pool Piping serve as yet another example of why many are turning to the sector-rising product to handle all their DeFi positions.
Cooper is the Editor of DeFi Rate and an active contributor to leading DeFi media outlets like The Defiant, DeFi Pulse, and Bankless. He works with early-stage teams through Fire Eyes DAO to incubate governance models and grassroots community development. He is an ambassador to Set Protocol and an author of a weekly publication called Token Tuesdays. To stay up with Cooper, follow him on Twitter.