How To: Be a Smarter Liquidity Provider Using Rift

Use Rift to earn double farming returns and protect yourself from the downside risk of impermanent loss.

How To: Be a Smarter Liquidity Provider Using Rift
Be a smarter LP. Use Rift to earn double farming returns and protect yourself from the downside risk of impermanent loss.

Today we are proud to announce the upcoming launch of the Rift Public Vaults. Soon, liquidity providers will be able to use the Rift protocol to double their farming returns and protect themselves from the downside risk of impermanent loss. Using Rift to support DAO token liquidity will be more profitable and less risky than depositing into a DEX directly.

Rift has made a commitment to support DAOs at all stages of growth, wherever they are built. Following a $50M TVL private beta on Ethereum, Rift deployed to Aurora and has supported the liquidity of over 10 protocols. Recently, we expanded our services to allow DAOs to launch their governance token using Rift’s liquidity infrastructure.

Providing Liquidity on Rift

Rift is a decentralized protocol that restructures incentives to improve liquidity across DeFi. Liquidity providers will soon be able to deposit into Rift Vaults through the webapp. The capital deposited will be paired with governance tokens provided by DAOs and then deployed to a DEX to start earning swap fees. As DAOs are liquidity-motivated and LPs are profit-motivated, DAOs grant LPs the full yield earned by the position to incentivize participation. This allows LPs to earn double swap fees and rewards.

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Rift allows LPs to participate in single-sided 2x leveraged farming with no liquidation risk.

On top of this, Rift LPs receive impermanent loss protection. The downside risk of depositing directly to a decentralized exchange (DEX) is high. As a DEX LP, you would need to deposit both tokens in the pair and take on the risk of impermanent loss.

Breaking It Down

Liquidity providers earn yield from swap fees and other rewards while enjoying downside IL protection. Upon withdrawal, all the swap fees and rewards are converted to the asset the LP originally deposited.

Double Returns

As a Rift LP, the upside is virtually limitless. LPs on Rift are able to farm with 2x leverage to earn double the returns and provide sustainable liquidity to DAOs at the same time.

LPs on Rift earn double swap fees and rewards compared to depositing on DEXs.

Protection against Impermanent Loss

In the scenario below, we see a significant amount of impermanent loss. If this happened to an LP on a DEX, they would get rekt. However, Rift LPs are protected from these losses.

On Rift, LPs are able to get back at least their initial deposit, except in the most extreme scenarios where IL is significant.

Rift LPs have downside impermanent loss protection which allows them to withdraw at least their initial deposit despite any IL.
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LPs are substantially better off depositing through Rift than directly into a DEX. Rift significantly changes the risk and return profile to provide LPs double returns on the upside and protection on the downside.

Impact to DAOs

DAOs require sustainable liquidity for their tokens as it allows their communities to grow and reduces the risk of token volatility. Rift built a novel form of protocol-owned liquidity to supercharge DAO growth. With Rift, DAOs are able to achieve substantial token liquidity without needing to forfeit ownership over their treasuries.

DAOs can simply deposit their governance tokens into a Rift Vault and grant liquidity providers the ability to farm with 2x leverage. In the case of IL, DAOs will need to subsidize any losses to LPs. This is substantially more effective than liquidity mining, setting a sustainable liquidity foundation for DAOs powered by Rift to grow in perpetuity.

Wen Public Vaults?

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Our team is more bullish than ever on DAOs as the core units of our new, internet-native society and we will continue to build through any market conditions to support these communities.

If you really want the alpha (and to shape the future of DAO financing), we are hiring!


About Rift Finance

Rift is a decentralized protocol that restructures incentives to improve liquidity across DeFi. The Rift Protocol allows DAOs to deploy governance tokens from their treasuries to pair with tokens from liquidity providers. By working together, DAOs receive the liquidity they seek, and LPs receive double returns and reduced risk. DAOs across several leading Layer 1 blockchains, including Ethereum, NEAR, Fantom, and Injective, utilize Rift to unlock sustainable liquidity.

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