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DeFi Platform and Tools Suite for Concentrated Liquidity Strategies
Uniswap launched the third iteration of its protocol on May 3rd and reached 700MM daily volume in one month, greatly increasing its utility as liquidity providers (LPs) were now able to create strategic liquidity provision in order to maximize yields. With the Arbitrum Ethereum Layer 2 implementation, Uniswap is expected to challenge the volume of centralized order book exchanges such as Binance, OKEx, and FTX. However, traditional market makers on current centralized exchanges lack the tools to enter the Decentralized Finance (DeFi) space.
Teahouse aims to provide an ease-of-mind smart contract interface between Uniswap/Perpetual Protocol v2 (Curie) and fund managers; where managers are able to not only develop their strategies off-chain (to avoid front-running), but also raise, manage, and pay out ETFs on-chain as custodians.
As strategies may be off-chain (to avoid front-running), the vaults have to be on-chain (as custodians) to deter fund managers from rug-pulling. Teahouse provides a smart contract for fund managers to accept liquidity from investors and operate the smart contract to adjust positions in a Uniswap v3 pool.
Because the strategy is controlled from an off-chain backend, it can be adjusted at any time, have complex computations, and reference more data. In addition, an off-chain backend can only adjust positions but cannot retrieve liquidity from the smart contract, so fund managers cannot arbitrarily withdraw the investors’ funds.
Teahouse uses the trading history from Uniswap v3 to calculate each vault’s performance. The profit of each position can be calculated when one can test using "burn zero" in the smart contract simulator, hence the price can be monitored within a preset range. Large trades can also be separated into smaller ones to avoid price slippage.