Instrumental Finance
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Introduction
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Initial Strategies
Our ultimate vision at Instrumental is to become a strategy hub to empower and enable users access to novel yield-earning opportunities across layers and chains. These novel strategies will be deployed through Instrumental, specifically targeted towards arbitrage and APY maximization across chains and layers.
We are building to hunt underutilized and untapped opportunities which emphasizes the core importance of our protocol. We continue to work towards automating liquidity provisioning (LPing) token movements to access new alpha strategies and our initial strategies are fully accessible to the public. Community members and DeFi enthusiasts can start leveraging our initial strategies to begin maximizing their yield right now, with more to come in the future.
Maximizing Yield Across Different Chains and Layers
Instrumental Finance allows users to continue earning fees from LPing while providing the benefit of seamlessly participating in additional opportunities that were previously out of reach. An example of an additional opportunity is the ability to participate in a liquidity rush event as a new chain launches to support and capture a protocol’s native tokens without hassle.
Previously, if a user wanted to accomplish this type of activity they would have to do so in three separate steps each costing the user time and capital:
- 1.The user would have to exit out of their LP position
- 2.The user would have to utilize a bridge to move his assets to the layer hosting the protocol or liquidity rush event
- 3.The user would have to re-enter an LP position on this new layer in order to participate
The above stated approach and strategy is automated through the Instrumental approach thus resulting in a one step process that captures the same result without the fees and time constraints. The Instrumental improvement in this process is important not only for the projects that are launching and seeking liquidity but also for the early supporters of those projects that want to reap the benefit of participating early without having to jump over the hurdles of the current siloed multi chain framework.
Yield Maximization Example
In order to showcase the key benefits of the Instrumental solution we need to first showcase the shortcomings of the current state, we will do so by revisiting the simple example of John aligned with several graphic demonstrations:
John is a DeFi enthusiast that has opted to take advantage of yield generation (APY) by providing liquidity into a ETH-USDC pool on Sushiswap:
A few days later John realizes that there is an opportunity where the same position of ETH-USDC provides higher yield (APY) on Moonriver, which is a different instance of the same protocol:
This is where John starts to realize that these different layers that provide certain benefits come with shortcomings that fall on the shoulders of the end-users. John is interested in pursuing the higher yield opportunity but his process would take time and include fees:
Taking all of this into account, this opportunity that John found may in actuality not result in a higher yield due to time, fees, and other constraints:
If John took the Instrumental approach, the Instrumental Vault would automate the previously mentioned complex process for John to be in the Moonriver ETH-USDC position, thus providing him with maximized yield.
Pool Yield Arbitrage
Another exciting strategy that represents further opportunities enabled by Instrumental Finance involves freeing liquidity and LP positions to capture arbitrage yield across different pools. Our research shows and highlights the benefits of an automated and simplified token movement mechanism that when deployed across pools allows LPers to benefit from arbitrage opportunities.
In joint-research efforts with Composable Labs and Advanced Blockchain AG, we have found a way to nullify lack of liquidity while increasing reward distributions to LPers. We utilize Instrumental’s logic on top of Composable’s SDK to automatically track and redistribute liquidity. This simplifies cross-layer transactions, optimizes reward distribution, and alleviates liquidity concerns for LPers. For additional information checkout 0xbrainjar’s article on Pool Yield Arbitrage.
Underutilization hinders maximization
Instrumental Finance at its core has set out to be a user-centric solution to tap into opportunities in DeFi that are present but out of reach of the current framework. We present a solution that takes us from a multi-chain framework to one that is cross-chain, providing an environment where users and projects can benefit from unique offerings across multiple chains but in an interoperable way.
Our approach is supplementary to the existing methods of liquidity provisioning. Meaning, users are still participating in DeFi native strategies like earning fees through LPing but are now empowered to participate in additional opportunities that were untapped or unreasonable beforehand. Instead of the high fees and processes users encounter in an attempt to capture yield from a new strategy, that barrier is eliminated with the Instrumental approach.
Community Call to Action: Embrace the Storm
Developing strategies to maximize yield through Instrumental is a community effort. We want to work with anyone who shares our vision of an interoperable future where yield earning is maximized to its fullest potential. We hope to hear and develop strategies that originate from the broader ecosystem as time progresses to make our strategy hub as diverse and robust as possible. As these strategies come together, we look forward to sharing them with our community.