Mean-zero IL Pools
A pair (or pool) in Integral SIZE is a smart contract that holds the ERC20 tokens where actual events (swap/deposit/withdraw) happen.
Currently, Integral SIZE only supports 2-token swapping, so each pool contains only 2 tokens. Each trading pair (such as WBTC-WETH, USDC-WETH) has its own pool.
Due to the 30-min delay mechanism, only the delay contract can directly interact with the pair contract. All the swap/deposit/withdraw actions have to be invoked by the delay contract, and cannot be triggered by anyone else.
Pair creation is a governance-controlled process instead of a templated system such as in Uniswap. This is because pair creation in SIZE involves many other parameters including oracle choice, fee rate, etc, that need to be decided by governance.
LPs of Integral SIZE experiences Mean-zero Impermanent Loss. This means that IL will be negative, making it more profitable to put asset into the pool than holding it in your wallet.
In the long run, IL will converge to 0.
This is made possible with Uniswap oracle and trade delay mechanism, which eliminates most of the frontrunning/cross-exchange arbitrageurs.
Although the trade delay is a slightly negative user experience for traders, it is implemented because it is a crucial way to protect LPs.
LPs incur sure losses when sure-profit traders (arbitrageurs, front-running, etc.) are able to trade on Integral.
But with our trade delay mechanism, they can't be certain that they will make sure profits anymore, so they will trade somewhere else.
They can't be sure of the profits because they have to wait 5 minutes, and their 5-min price prediction will carry substantial risk (as former top quants, we know for sure that nobody in the world can continually make 5-min predictions with more than 70% certainty). There is a huge risk to price prediction, so their rational choice is go to some other exchanges to execute their near 100% sure-profit trades, instead of taking their, at best, 70% chances with us.
Our LP pool is a lot like a Chinese Hot Pot where you have two soup flavors, one soup flavor is called LINK, the other called ETH. Because this is a magical pot, LINK soup can be converted to ETH soup and vice versa. And as long as the conversion rate (price) is fair, the overall pot is still full of good soup.
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This is what happens when we deal with most traders: a few come in for some LINK soup and take out some ETH soup; and the next few do the opposite. Yes, of course, sometimes you have more LINK soup and sometimes more ETH soup, but these are all fair conversions. This is called "Cyclical Imbalance". Oh don't forget, you get to charge a fee for providing this conversion service.
Last modified 9mo ago