Bitcoin’s advent in 2008 created a landscape for innovation and a possibility of decentralization in the then, very centralized finance world. With the growth of Ethereum it has become even more evident that the decentralized finance sector has an immense potential to impact the future of fintech, with almost $12 Billion Total Value Locked in DeFi at the time of writing.
Till early 2020, centralized exchanges were some of the most profitable businesses in the whole blockchain space because of the liquid nature of digital assets and the high volatility of their prices. There was a huge shift in the dynamics of liquidity acquisition from centralized platforms to decentralized ones with the introduction of Automated Market Makers, or AMMs.
AMMs like Uniswap, Balancer are primarily used to exchange one erc20 token to another.
The smart contracts that hold these erc20 tokens in reserve ratio with each other are called Pools. The pools get liquidity from users that earn fees for providing liquidity.
One of the prime functions of these pools is to distribute fees to the participants that provide liquidity.
When liquidity is added to a Pool, the AMM generates an ERC20 Liquidity Pool Token(LPT) that acts like a receipt of the liquidity added and fee earned in the pool.
Unbound is a decentralized liquidity protocol that is building the derivative layer of Automated Market Makers (AMM). The intent of Unbound is to build products that are both native and composable to the DeFi ecosystem. These include
Synthetic Assets including a Stablecoin(UND), uETH,etc
AMM pools that are cross derived from multiple AMMs
Oracle Price Feeds based on free markets and path independent value discovery.
Building financial instruments for compounding yields and margin trades
Unbound protocol is building a management layer over the existing AMMs by locking up LPT to mint synthetic assets that further reinforces liquidity in AMMs and Defi, unlocking liquidity from existing AMM Liquidity Pools. The initial set of product Unbound has built include stablecoin called UND.
Key Features of Unbound
Liquidation Free Liquidity Provision System
No Debt position is created with minted assets
UND a stable coin that doesn't needs to be stabilized
Liquidity Lock contracts designed to be permissionless and supports AMMs like Uniswap, Balancer, Mooniswap, etc
Unbound has created a robust architecture that does not require a Liquidation Engine. A combination of collateral ratio, risk management through selected stablecoin-ERC20 LPT pairs, and SAFU fund ensures a support system that is a lot more resilient than traditional crypto assets under similar circumstances. This is a huge shift from the existing lending landscape.