Integrated Liquidity Markets — Automated Growth Strategies. A Step by Step guide
🎉 Exciting Announcement! Lido Finance has granted Seamless Protocol over $25K in wstETH Rewards for ILMs this month. Users who participate in ILMs are eligible to earn a portion of these rewards! 🎉
Integrated Liquidity Markets (ILMs) represent a paradigm shift to how DeFi users approach executing their personalized growth strategies. With ILMs, users can automate their strategies with just a few clicks — ultimately leading to cost-savings, autoc ompounding of rewards, and ease of management.
ILMs were recently introduced by Seamless Protocol to offer users an ability to immediately enter a pre-determined strategy (such as looping) by interacting with smart contracts through a seamless UX. To learn more about ILMs please read our Introducing ILMs Blog Series:
ILMs 101: Automated growth strategies to magnify your rewards
ILMs 102: Key Differentiators and A Leap Forward for Base DeFi
ILMs 103: The Power of Auto Compounding and Capital Efficiency
To get started with ILMs check out this step by step guide 👇:
- Navigate to the Seamless Protocol App Home Page to view a list of ILM strategies:
2. Click the Details button to view more about the ILM Strategy and get a sense for how the strategy works:
For the inaugural wstETH/ETH 3x ILM strategy. Users enter with wstETH, and the strategy borrows available ETH from the supply side of Seamless Protocol.
This ETH is swapped for more wstETH via DEX liquidity on Base. Now that the user has more wstETH, that user reaps the benefits of generating even more staking rewards from their wstETH holdings. These rewards are auto-compounded back into the strategy, adding to the strategy’s performance.
*Note this strategy, does NOT increase exposure 3x to ETH. Because there is a borrow of ETH, that ETH needs to be repaid. The ETH loan is denominated in ETH terms not USDC therefore 2 ETH added to the strategy means 2 ETH will be repaid.
The user gains the added benefit of more staking fee rewards by holding more wstETH, without being subject to the leveraged exposure. This powerful dynamic results in more rewards for users on their initial deposit of wstETH.
3. Click Deposit to add wstETH into the ILM. Once clicked a modal will pop-up to confirm deposit.
Note* There are DEX fees inherent to any looping strategy. These are fees not brought on by Seamless Protocol, but rather from Dexes on Base that earn a fee every time assets are swapped into one another, in this case, ETH swapped into wstETH.
Once wstETH is added, the cost basis will be the deposit minus dex fees to obtain the relevant 3x leverage.
Ex. If a user enters the ILM with 2 wstETH, their cost basis may turn out to be ~1.99 wstETH which is their deposit amount net of DEX fees.
4. Now that the user has deposited into the ILM, they receive LP tokens signifying their position in the pool.
The user will see their deposited LP Tokens as their balance in the strategy. This LP Token balance will remain static during the course of the strategy assuming no additional deposits/withdraws take place for that user. These LP Tokens are composable and can be transferred for other purposes
The underlying value of the LP Tokens will change in accordance to the staking fee rewards that are generated through the staking of wstETH.
🎉Additionally Lido Finance has granted over $25K in wstETH rewards which are distributed to ILM LP Holders! 🎉
*To view the real time value of ILM LP Tokens, community members have found that DeBank is a helpful resource.
5. If a user chooses to withdraw, they can do so by clicking Withdraw.
An exciting new look and UX is coming for the broader Seamless App 🙏, including enhancements to the ILM flow! Stay tuned for more, and check the Seamless Community Discord for the latest updates.
FAQs?
Who are ILMs built for?
If you are someone who is long ETH and/or is a believer in Ethereum’s potential to revolutionize the way individuals interact with the blockchain, ILMs are for you.
If you are someone who stakes ETH via Lido Finance, Rocketpool or other staking providers, ILMs are for you.
If you are looking for an easy and fast way to magnify your own ETH staking rewards that does not require consistent active position management, ILMs are for you.
How are ILMs different from the competition?
There are other looping strategies that exist, however ILMs are different on a few key facets.
- ILMs do not have any hidden fees inherent to the strategy. Other products take fees which have a material impact on a user’s P/L which takes months to recoup.
- ILMs auto compound gains from staking fees and automatically rebalance to take on additional debt to maintain a 3x leverage ratio. Other products require manual intervention to capitalize on these opportunities
Is lower-collateral borrowing secure?
With other DeFi lending and borrowing, there is no specific purpose tied to the borrow i.e. a user can take those funds and choose what to do with them on or off platform. Because of this, overcollateralization is necessary to ensure there is sufficient funds to pay back the lender.
With ILMs, there IS a specific purpose tied to the borrow and the funds are managed by a smart contract without leaving the protocol. This means that the user can’t run off with these funds thereby offering a more capital efficient solution with less idled capital locked up as collateral.
What is the inaugural ILM strategy?
The inaugural ILM strategy is a 3x leveraged wstETH/ETH looping strategy. In this strategy, users deposit wstETH and ETH is borrowed to magnify their position.
Have ILMs been audited?
Yes, ILM smart contracts have been audited via formal verification from Certora, a leading blockchain auditing firm who has audited DeFi giants such as Maker, Lido and Balancer.
Seamless Protocol is the first decentralized, native lending and borrowing protocol on Base. Seamless lays the foundation for the next generation of DeFi, focusing on lower-collateral borrowing and a better user experience to inspire the masses.
Join the community and get plugged in via the following links:
🧑💻 Website: https://seamlessprotocol.com
📱 App: https://app.seamlessprotocol.com
🐦 Twitter: https://twitter.com/seamlessfi
👾 Discord: https://discord.com/invite/Uye9jCVgUp
💬 Telegram: https://t.me/seamless_protocol
