Example Strategy Types

CLMM (Concentrated Liquidity Market Making) Strategies

Narrow Wide Strategies

Functionalities: Narrow/Wide strategies focus on setting liquidity within either tight (narrow) or broad (wide) price ranges on Concentrated Liquidity Automated Market Maker. Narrow ranges are optimized for earning higher fees in stable markets, whereas wide ranges aim at capital efficiency during volatility.

Operational Mechanisms: Utilizing concentrated liquidity features of protocols like Uniswap V3, these strategies dynamically adjust the price range of liquidity provision based on market trend predictions and volatility assessments.

DeFi Benefits: Users benefit from potentially higher yield in stable conditions (narrow) and reduced impermanent loss in volatile markets (wide), enhancing overall capital efficiency.

Pegged Strategies

Functionalities: Pegged strategies are designed for assets expected to maintain a stable price relation, such as stablecoin pairs. The focus is on managing liquidity for minimal impermanent loss.

Operational Mechanisms: Smart contracts monitor the pegged price relationship, adjusting liquidity parameters to maintain optimal positions within AMMs, ensuring minimal deviation from the peg.

DeFi Benefits: These strategies offer users a reduced risk of impermanent loss, making them ideal for conservative investors seeking stable returns from liquidity provision.

Multi-Range Vaults

Functionalities: Multi-range vaults allow liquidity to be distributed across several price ranges, maximizing fee-generation opportunities across different market conditions. Also great for market-making opportunities for custom token projects that wish to have more control over the supply and demand of specific price ranges

Operational Mechanisms: By leveraging algorithmic models, these vaults dynamically reallocate liquidity to the most optimal ranges.

DeFi Benefits: This approach gives more control over price exposure.

Hedged Up/Down Strategies

Functionalities: Hedged Up/Down strategies involve taking positions that are inversely related to the market movements to protect or profit from price changes. "Hedged Up" positions benefit from price increases, while "Hedged Down" positions gain when prices decline.

Operational Mechanisms: These strategies typically employ derivatives like perpetual contracts to hedge positions, using projects like Kwenta to automate the hedging process based on market signals and volatility indicators on-chain.

DeFi Benefits: By minimizing exposure to adverse price movements, these strategies can help reduce impermanent loss.

Non-CLMM Strategies

Bridge Liquidity Pools

Functionalities: These pools facilitate asset transfers between different blockchains, providing liquidity for cross-chain swaps.

Operational Mechanisms: Smart contracts manage the liquidity in these pools, ensuring that assets are available for bridging.

DeFi Benefits: Users benefit from single-sided liquidity deposits which means having no impermanent loss.

Liquid Staking, Real-World Assets (RWA) Pools, Derivatives

Functionalities: These strategies offer additional yield opportunities by engaging in liquid staking, investing in tokenized real-world assets, or participating in derivative markets.

Operational Mechanisms: Deploying smart contracts that interact with various DeFi protocols, these strategies optimize yields across different asset classes and financial instruments.

DeFi Benefits: They provide diversified income streams, enhancing portfolio resilience against market volatility and offering access to novel DeFi yield opportunities.

Liquid Staking Strategies

Functionalities: Liquid staking strategies enable users to participate in network security and consensus mechanisms without locking assets or losing liquidity. Users can stake their cryptocurrencies in exchange for staking derivatives that represent their staked assets plus potential yields.

Operational Mechanisms: Through smart contracts, Clip Finance interacts with liquid staking platforms to stake assets on behalf of users. These contracts handle the issuance of staking derivatives, track yields, and allow for the seamless exchange back to the original asset or trading within the ecosystem.

DeFi Benefits: This strategy offers users the dual benefits of contributing to network security while earning staking rewards. It also maintains liquidity, allowing users to utilize their staked assets in other DeFi activities without withdrawing from the staking mechanism.

Real-World Assets (RWA) Pools

Functionalities: RWA pools involve the tokenization of real-world assets, such as real estate, commodities, or art, into tradable tokens on the blockchain. This strategy allows users to invest in and derive yields from assets outside traditional cryptocurrency markets.

Operational Mechanisms: Clip Finance pools distribute yields, and facilitate trading or liquidity provision within RWA pools.

DeFi Benefits: By diversifying into real-world assets, users can potentially reduce portfolio volatility and access yields from economies outside the cryptocurrency space. This strategy also democratizes access to investment opportunities previously available only to large investors or institutions.

Borrowing & Lending Strategies

Functionalities: Borrowing and lending strategies involve the provision or acquisition of liquidity through DeFi protocols, enabling users to lend their assets for interest or borrow against their holdings.

Operational Mechanisms: Through smart contracts, Clip Finance participates in DeFi lending protocols, automating the process of lending assets for yield or creating leveraged positions through borrowing. These strategies carefully manage risk and optimize the interest rate differential between lending and borrowing.

DeFi Benefits: This approach provides users with interest on lent assets and access to liquidity without the need to sell holdings. It also introduces financial leverage into yield strategies, amplifying potential returns while managing the associated risks.