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Superstate has proposed a new protocol to address liquidity fragmentation in Layer 2s by enabling assets to exist in two protocols simultaneously, benefiting both liquidity providers and borrowers. The proof of concept is operational on Polygon with Aave v3 markets, and a $100,000 funding request has been made for future developments, including audits, front end and general factory, community growth, and deployment to other Layer 2s.
Superstate has proposed a novel protocol that aims to revolutionize the way assets are held in Layer 2s. The protocol employs a virtualization system that allows an asset's location to be in two protocols simultaneously, addressing the issue of liquidity fragmentation across protocols. This system enables liquidity providers (LPs) to access full interest rates from markets such as Aave, while also earning full fees from swaps in the Automated Market Maker (AMM)1.
The protocol has been demonstrated through a proof of concept that is currently operational on Polygon, using Aave v3 markets. In addition, Superstate has developed an open-source ERC4626 adapter for Aave v3, and has outlined plans for future development, including front end and general factory, audits, community growth, and deployment to other Layer 2s1.
To fund these developments, Superstate is requesting $100,000, which will be allocated towards auditing, front end costs, operational costs, and a dedicated noodle budget. The budget also includes provisions for hiring developers and marketing costs, with a focus on creating a smooth front end and selecting lending markets to create new AMMs for assets1.
Superstate's proposal also includes potential benefits for Aave, such as tapping AMM LP Liquidity as liquidity for Aave v3 lending markets, which would result in more capacity and lower fees for borrowers. It would also incentivize AMM LPs to switch from current AMMs to sAMMs, thereby providing liquidity to Aave for interest. Another proposed benefit is allowing Aave lenders to also LP while still earning the same interest from loans and swap fees1.
In conclusion, Superstate's proposal presents a promising solution to the issue of liquidity fragmentation, with potential benefits for both LPs and borrowers. The proof of concept and future plans demonstrate a clear roadmap for the protocol's development, and the requested funding will support these efforts. Further information can be found on their GitHub repositories, documentation on superstate.gitbook.io, and a Discord link1.
Posted a year ago
Last reply a year ago
Summary updated 2 months ago
Last updated 09/12 13:53