How Instrumental Finance Corrects Challenges in Liquidity Provisioning
December 02 2021 - 7:40AM
NEWSBTC
Liquidity provisioning is arguably one of the most important
developments in DeFi to date allowing innovators and end-users to
explore new boundaries per financial instruments without the usual
go-betweens. The concept of liquidity provisioning, whether inbound
or outbound, has quickly established itself as the essence for the
burgeoning DeFi industry’s continued growth, growing more than
1,000% since the March Covid market crash of 2020. However, as DeFi
advances into the future at full speed, challenges to liquidity
provisioning (LPing) continue to grow. A siloing effect has emerged
in the industry due to a lack of interoperability between the
different layer 2 and layer 1 solutions and their respective
applications. Meanwhile, the success of liquidity provisioning is
dependent on moving in and out of trade positions to maximize
earnings at the slightest cost. Without interoperability solutions,
transferring assets from different protocols on different layers
becomes extremely difficult. This can ultimately discourage
liquidity providers; the time and fees it takes to switch their LP
position to one on another chain or layer may no longer be worth
the new yield opportunity. Thus, users are unable to maximize their
earnings, and the use case of liquidity provisioning falls short.
Instrumental Finance presents a new solution that attempts to
alleviate these interoperability problems for liquidity providers
and the larger DeFi ecosystem. Instrumental is a chain and
layer-agnostic solution directing LP positions through various L1
and L2 scaling solutions. Its solution is able to help facilitate
asset transfers, swaps, and the creation and support of complex LP
strategies for its users. By doing so, Instrumental can help
liquidity providers access new yield opportunities that currently
are not available to them. Incubated by Composable Labs, the
incubation arm of Composable Finance, Instrumental is taking
advantage of the software development kit (SDK) and cross-layer
asset swapping Mosaic tool from Composable Finance. This allows
Instrumental to power the Instrumental Vault, their main feature
that helps users optimize their LP yield across different L2s and
L1. Instrumental will also benefit from L2 and L1 solutions already
linked to Composable’s Mosaic tool, such as Arbitrum, Polygon, the
Avalanche C-Chain, and Moonriver. This strategic relationship with
Composable will help Instrumental enable and deliver yield
opportunities to an even broader community of users. Instrumental’s
strategy addresses the barriers to LPing head-on in order to
optimize yield for its users. It solves interoperability issues by
bridging between chains and layers, setting the stage for
Instrumental to essentially become a money lego. This allows for
future applications to build off of this foundation and benefit
from Instrumental’s innovations. Other solutions in the industry
currently unmatch this approach to solving the problems that plague
liquidity provisioning. Instrumental’s innovative solution puts it
in a position to lead DeFi into the future of decentralized
liquidity providing, allowing the industry to continue to
grow in the right direction.
Polygon (COIN:MATICUSD)
Historical Stock Chart
From Aug 2024 to Sep 2024
Polygon (COIN:MATICUSD)
Historical Stock Chart
From Sep 2023 to Sep 2024