The openness and permissionless nature of decentralized exchanges (DEX) allow for the participation of ordinary individuals in providing liquidity, enabling the concept of "everyone is a market maker." However, in reality, the majority of liquidity providers end up losing money. The introduction of concentrated liquidity in Uniswap V3 has made liquidity provision more complex and specialized. Recently, numerous ecosystems have seen the emergence of DEX designs with concentrated liquidity. Considering the unique on-chain environment, including transaction confirmation delays, MEV (Miner Extractable Value), fee mechanisms, slippage, and the distinct mathematical calculations and characteristics of AMM (Automated Market Maker) models compared to traditional order books, it is expected that there will be more market-making teams focused on providing professional liquidity services in concentrated liquidity DEX.
Any centralized entity carries the risk of single-point malicious behavior. DEX, with its asset transparency, security, non-custodial nature, and open composability, will prove its reliability as centralized institutions rise and fall. iZUMi was created for this purpose. iZUMi Finance is a multi-chain DeFi protocol that offers a one-stop liquidity-as-a-service (LaaS) solution. Its concept revolves around providing better on-chain liquidity for every token in an efficient and sustainable manner.
What is iZUMi?
As its Japanese name "iZUMi" suggests, which means "spring" or "source of water," its ultimate goal is to help every partner and token enjoy on-chain liquidity that flows continuously and remains fresh. iZUMi Finance, as a provider of one-stop liquidity services, is continuously expanding its multi-chain ecosystem to eventually support cross-chain liquidity trading mechanisms. It aims to bring systematic liquidity services to the multi-chain ecosystem and become a one-stop liquidity service platform for the DeFi industry with ultra-high capital efficiency. iZUMi's founder, Jimmy Yin, has been researching blockchain since 2017. In a recent Hackathon, the iZUMI team achieved third place by implementing a one-click LP generation solution for Uniswap V3. Since then, iZiSwap has been providing one-stop liquidity services to projects through the V3 liquidity incentive tool LiquidBox and complementary market-making strategies.
To date, iZUMI Finance has completed three funding rounds, raising a total of $35.6 million. Investors include IOSG Ventures, Cadenza Ventures, Distributed Capital, Everest Ventures, and others. The most recent funding round took place on May 20, 2022, with a raised amount of $30 million. Currently, iZUMI has launched three on-chain liquidity products: LiquidBox, iZiSwap, and iUSD.
iZUMi offers several liquidity products:
1. Liquidity Mining - LiquidBox:
With the deployment of Uniswap V3 on other Ethereum Layer 2 ecosystems, iZUMi was the first to introduce and implement a liquidity mining solution called "LiquidBox" that utilizes Uniswap V3 NFT LP tokens to provide programmable liquidity-as-a-service (LaaS) on Ethereum. Currently, LiquidBox has also been successfully deployed on Arbitrum & Polygon.
Unlike traditional V2 LP tokens used for staking in liquidity mining, LiquidBox allows the protocol to set explicit value ranges for incentivized LP tokens. When users stake their V3 LP tokens in the iZUMi protocol, LiquidBox automatically checks if the LP tokens fall within the specified value range set by the project. If they do, LiquidBox rewards liquidity providers with liquidity mining tokens according to the incentive program.
2. Innovative Liquidity Algorithm Swap - iZiswap:
Following the launch on BNB Chain, iZUMi Finance introduced iZiswap, which utilizes an innovative Discretized-Liquidity-AMM (DL-AMM) model. Building upon the concentrated liquidity model of Uniswap V3, iZiswap implements an AMM mechanism that supports discrete liquidity for each price movement. This provides DEX users with a trading experience similar to centralized exchanges (CEX) by enabling non-custodial order book-based limit orders. The DL-AMM mechanism enables iZiswap to provide up to 5000 times higher capital efficiency compared to traditional x*y=k DEX models.
The DL-AMM algorithm adopts a new discrete liquidity algorithm that exhibits characteristics similar to concentrated liquidity market-making in Uniswap V3 but allows liquidity to be precisely allocated at any fixed price, rather than within a price range. This makes liquidity management easier for iZiswap and supports additional trading methods, such as limit orders.
3. Convertible Bond - iUSD:
Utilizing specialized token tools and over-collateralization mechanisms in the DeFi space, iZUMi introduced the first USD-denominated convertible bond called iUSD (iZUMi Bond USD).
Unlike traditional algorithmic stablecoins, iUSD eliminates systematic risks by using transparent on-chain funds managed by smart contracts and multi-signature wallets as over-collateralization to support the value of iUSD. Through the Solv Protocol, iZUMi issues convertible bonds that allow investors to convert them into iZi tokens at a specific price upon maturity, enabling investors to benefit from potential investment returns resulting from the appreciation of iZi tokens.
The on-chain liquidity rewards obtained by the iZUMi platform directly support bond mining investors. Bond Farming is a structured liquidity mining method that provides risk-free returns to bond holders. By guaranteeing the repayment of principal and interest to investors, Bond Farming introduces a paradigm shift in liquidity mining, where the generated profits are first used to reward investors and then incentivize market makers. iZUMi also adopts a crucial investment model from traditional finance, offering multi-tiered investment products that provide stable low returns for investors with low risk tolerance and higher volatility options for investors with higher risk preferences. This model significantly improves capital utilization efficiency and, based on on-chain smart contracts in DeFi, provides investment options that meet the needs of participants, making it an innovative frontier in the field of on-chain liquidity in DeFi.
iZUMI's Distinctive Features
1. Higher Efficiency with Discrete Liquidity Assets
iZUMI has upgraded the Uniswap algorithm by improving the AMM model, which was initially deployed in Uniswap v3's concentrated liquidity model. It incorporates the innovative Discretized-Liquidity-AMM (DL-AMM) model, making iZUMI the industry's first AMM-based DEX that is 100% on-chain and supports limit order book (LOB) trading.
Discretized-Liquidity AMM deploys liquidity within every price movement, reducing slippage when swapping tokens. DL-AMM segments the price ranges into small and narrow fragments, making these price ranges close to zero. By providing liquidity within each required price range, DL-AMM further improves capital efficiency. Traders on iZiSwap benefit from higher capital efficiency, zero slippage, lower transaction costs, and guaranteed liquidity within any desired price range.
2. Allowance of Limit Orders
iZiSwap utilizes the original DL-AMM discrete liquidity AMM model, enabling liquidity deployment at each fixed price point. Unlike custodial limit order services, which are essentially price monitoring programs that help users execute trades at the market price when triggered, they cannot determine the success rate of trades or the stability of transaction prices.
Users' limit orders are considered as adding liquidity at a specific price movement, allowing users to trade at a fixed price as limit orders. The limit order functionality is free for users, requiring no additional fees. Consequently, it is even cheaper than the privileges of Binance VIP 8 (which still charges 0.02%).
Token Economy Model:
1. iZUMi Token - iZi:
iZi is a utility token based on the ERC-20 standard on Ethereum, used within the iZUMi platform. With a total supply of 2 billion, iZi tokens are used for setting up incentive pools and accessing various tools. Users need to stake iZi tokens to obtain ve-iZi tokens, which are the governance tokens of the iZUMi platform, giving holders eligibility for a range of benefits and participation in governance.
2. Role of ve-iZi:
1) Voting: DAO governance and Quadratic voting are adopted to determine key issues. Each period's iZi emission is determined and distributed based on ve-iZi voting weight. ve-iZi holders can delegate their voting rights to another address.
2) Staking: 50% of platform earnings are used to repurchase iZi tokens and distribute them monthly to ve-iZi holders based on voting weight. During the first 4 years, 40 million iZi tokens will be distributed annually as staking rewards to ve-iZi holders.
3) Boosting: By staking NFTs, ve-iZi is used to boost the LiquidBox pool's APR to 2.5 times. The boosting mechanism calculates your income weight based on the smaller value between the amount of vliquidity calculated from UniV3 LP NFT staked on the iZUMi platform.
The Future Narrative of DEX:
The future narrative of DEX is a question that every decentralized practitioner should consider. DEX protocols, as the underlying infrastructure, have excellent openness. Protocols like Uniswap and iZUMi Finance's iZiSwap will continue to emerge with a series of products and services. Currently, leading DEX platforms are focusing on improving user experience and exposure, both on mobile and web platforms. Uniswap, after acquiring the NFT aggregation marketplace Genie, integrated Sudoswap to upgrade its web and app interfaces. DoDo is promoting large-scale applications while expanding into Web3 and traditional traffic entrances, capturing more users with gasless transactions and limit order functionalities. Additionally, Solana's DEX ecosystem and wallets like Chainge are primarily targeting mobile platforms. The dual-layer architecture of aggregators and DEX allows for the distribution of C-end traffic and liquidity, providing CEX-like frontend experiences and professional one-stop liquidity services, along with complementary financial derivatives. Within this supply chain, there are numerous opportunities in terms of product and service offerings.
iZiSwap Pro further enhances the capital efficiency of DEX through DL-AMM, offering users a user-friendly and cost-effective trading experience, making on-chain "coin trading" a possibility.
Official Website: https://iZUMI.finance/home
iZiSwap Guide: https://docs.iZUMI.finance/tutorial/how-to-use-iziswap