Blueshift’s innovations in detail
Jan 31, 2022
Blueshift is not a copycat of any other DeFi protocol. There are several significant innovations inside it that together create a unique market proposal:
Liquidity portfolios are an efficient way to increase capital usage efficiency. It is an alternative to Uniswap V3, which achieves concentrated liquidity by dividing the price space into ticks and making liquidity providers create active market positions. Portfolios address the problem in a different dimension — reducing redundancy of providing liquidity of the same token in different pairs. This lets liquidity providers keep their familiar role — just invest and earn APR.
Virtual pairs give us flexibility of using liquidity in swaps. Depending on market conditions and operation types, Blueshift implements 3 different strategies of creating virtual pairs:
- For normal swaps when token prices are stable Blueshift takes maximum available liquidity to make price slippage the lowest.
- When a price of any token in a portfolio goes high or low too fast (compared to an exponential moving average of the price), Blueshift applies a dynamic reserves model to decrease liquidity for virtual pairs with the token and protect the portfolio from losses.
- For arbitrage swaps Blueshift offers zero fee in exchange to decreased virtual reserves (typically to 10% of the maximum). This helps to reduce impermanent loss in 10 times.
Internal price oracles. Traditional AMM protocols use ratios of token amounts in liquidity pools to reflect exchange rates. This leads to both inconveniences and lower revenues — liquidity providers cannot consider liquidity pools as normal investments as token amounts change in a way that is not optimized for investment goals. Blueshift stores prices in internal price oracles and decouples them from token reserves. This gives an unprecedented flexibility of portfolio asset management and reusing the liquidity in external protocols.
Decentralized portfolio management. Blueshift introduces two mechanisms of portfolio reserves management:
- First step solution — deposit/withdrawal limits for liquidity providers. This mechanism protects portfolios from being disbalanced by chaotic actions of liquidity providers.
- DAO-controlled decentralized portfolio management will be launched in Q2 2022. The Blueshift DAO will have the possibility to vote on portfolio structure proposals (optimally created by professional portfolio management companies / individuals). After a proposal is accepted by the DAO, portfolios get rebalanced to fit the target structure by a decentralized mechanism where everybody can make rebalancing transactions and get rewards in BLUES for this job.