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Impermanent Loss on Blueshift

Apr 20, 2022

By now it should be no secret to readers and interested parties that Impermanent Loss on Blueshift is reduced by up to 10 times!

This seemingly magical reduction is simply a consequence of revolutionary mathematical innovations that have already been developed and are already being tested.

Before we dive deep into the numbers themselves, let’s first list the conceptual foundation that allows for such improvements in the world of Liquidity Provision:

1.Single-sided liquidity provision

3.Liquidity portfolios

4.Reserve model

5.Internal price oracles

Read more about these innovations here.

To demonstrate the power of these practical inventions we will closely examine a complex scenario that clearly demonstrates significant benefits for LPs on Blueshift.

The scenario involves Liquidity provision of BNB, BUSD, ETH and CAKE into a Blueshift liquidity portfolio, as well as in a PancakeSwap’s pool, whereby market conditions change and the changes are marked down. Finally, after all theoretical price changes and reserve changes are performed, and results are written down — we can compare Blueshift’s & PancakeSwap’s IL performance.

The total value of theoretical Liquidity deposited by an LP into Blueshift or PancakeSwap equates to $160,000,000. Likewise, initial price & reserve metrics are as follows:

Maket price

BNB — 400$
BUSD — 1$
ETH — 4000$
CAKE — 20$

Internal Price

BUSD — 0,0025 BNB

ETH — 10 BNB

CAKE — 0,05 BNB

Reserves

BNB — 100000
BUSD — 40000000
ETH — 10000
CAKE — 2000000

Blueshift

Step 1 — ETH market price grows to 4100$

Total liquidity — 161 000 000,00

Market value of the initial deposit — 161 000 000,00

Market profits — 1 000 000,00

Step 2 — Arbitrage swap 120 BNB -> ETH

BNB reserve — 100120

ETH reserve — 9988,142292
Total liquidity — 160 999 383,40

Market value of the initial deposit — 161 000 000,00
Market profits — 999 383,40
LP losses — — 616,60
Price slippage — 1,19 %
ETH internal price — 10,24144
Arbitrage profis — 616,60

Step 3 — Due to arbitrage ETH market price returns to 4000$

Total liquidity — 160 000 569,17
Market value of the initial deposit — 160 000 000,00
Market profits — 569,17
LP profits — 569,17

Step 4 — Arbitrage swap 7.5 ETH -> BNB

BNB reserve — 100043,774
ETH reserve — 9995,642292
Total liquidity — 160 000 078,77
Market profits — 78,77
LP profits — 78,77
Price slippage — 0,76 %
ETH internal price — 10,08608797

Arbitrage profits — 490,40

Step 5 — ETH market price falls to 3900$

ETH market price– 3900$

Total liquidity– 159 000 514,54

Market Value of the initial deposit — 159 000 000,00

Market losses– 999 485,46

Total LP profit (without market changes) — 514,54

Step 6 — Arbitrage swap 7.5 ETH -> BNB

BNB reserve — 99968,69602

ETH reserve — 10003,14229

Total liquidity — 158 999 733,35

Market losses — 1 000 266,65

Total LP loss (without market changes) — 266,65

Price slippage — 0,75%

ETH internal price BNB — 9,935273647

Arbitrage profits — 781,19

Step 7 — ETH market price falls to 2000$

ETH market price — 2000

Total Liquidity — 139 993 762,99

Market Value of the initial deposit — 140 000 000,00

Market Losses — 20 006 237,01

Total LP loss (without market changes) — 6 237,01

Step 8 — Arbitrage swap 400 ETH -> BNB

BNB reserve — 97129,79161

ETH reserve — 10403,14229

Total Liquidity — 139 658 201,23

Market losses — -20 341 798,77

Total LP losses (without market changes) — 341 798,77

Price slippage — 28,57%

ETH internal price BNB — 5,069927194

Arbitrage profits — 335 561,76

Step 9 — ETH market price grows to 6000

ETH market price — 6000

Total liquidity — 181 270 770,40

Market Value of the initial deposit — 180 000 000,00

Market profits — 21 270 770,40

Total LP profit — 1 270 770,40

Step 10 — Arbitrage swap 4000 BNB -> ETH

BNB reserve — 101129,7916

ETH reserve — 9954,456234

Total Liquidity — 180 178 654,05

Market profits — 20 178 654,05

Total LP profit — 178 654,05

Price slippage — 43,13%

ETH internal price BNB — 15,67592257

Arbitrage profits — 1 092 116,35

PancakeSwap

Step 1 — ETH market price grows to 4100

ETH market price — 4100

Total Liquidity — 241 000 000,00

Market value of the initial deposit — 241 000 000,00

Market profits — 1 000 000,00

Step 2 — Arbitrage Swap 750 BNB -> ETH

BNB reserve in BNB-ETH pair — 100750

ETH reserve — 9925,77998

Total Liquidity — 240 995 697,92

Market Profits — 995 697,92

Total LP loss — 4 302,08

Price slippage — 0.74%

ETH internal price BNB — 10,15033581

Arbitrage profits — 4 302,08

Step 3 — ETH market price returns to 4000

ETH market price — 4000

Total liquidity — 240 003 119,92

Market Value of the initial deposit — 240 000 000,00

Market profits — 3 119,92

Total LP profit — 3 119,92

Step 4 — Arbitrage swap 75 ETH -> BNB

BNB reserve in BNB-ETH pair — 99996,68368

ETH reserve — 10000,77998

Total Liquidity — 240 001 793,39

Market profits –1 793,39

Total LP profit — 1 793,39

Price slippage — 0,75%

ETH internal price BNB — 9,998888475

Arbitrage profits — 1 326,53

Step 5 — ETH market price falls to 3900$

ETH market price — 3900

Total Liquidity — 239 001 715,40

Market value of the initial deposit — 239 000 000,00

Market losses — 998 284,60

Total LP profit — 1 715,40

Step 6 — Arbitrage swap 75 ETH -> BNB

BNB reserve in BNB-ETH pair — 99254,56555

ETH reserve — 10075,77998

Total Liquidity — 238 997 368,14

Market losses — 1 002 631,86

Total LP loss — 2 631,86

Price slippage — 0,74%

ETH internal price BNB — 9,850807158

Arbitrage profits — 4 347,25

Step 7 — ETH market price falls to 2000$

ETH market price — 2000

Total Liquidity — 219 853 386,18

Market Value of the initial deposit — 220 000 000,00

Market losses — 20 146 613,82

Total LP loss — 146 613,82

Step 8 — Arbitrage swap 4000 ETH -> BNB

BNB reserve in BNB-ETH pair — 71109,41482

ETH reserve — 14075,77998

Total Liquidity — 216 595 325,89

Market losses — 23 404 674,11

Total LP losses — 3 404 674,11

Price slippage — 28,27%

ETH internal price BNB — 5,051898717

Arbitrage profits — 3 258 060,29

Step 9 — ETH market price grows to 6000$

ETH market price — 6000

Total Liquidity — 272 898 445,81

Market Value of the initial deposit — 260 000 000,00

Market profits — 32 898 445,81

Total LP profits — 12 898 445,81

Step 10 — Arbitrage Swap 50000 BNB -> ETH

BNB reserve in BNB-ETH pair — 121109,4148

ETH reserve — 8274,845567

Total liquidity — 258 092 839,33

Market profits — 18 092 839,33

LP loss — 1 907 160,67

Price slippage — 41,09%

ETH internal price BNB — 14,63585197

Arbitrage profits — 14 805 606,48

Overview of the comparison

The results which have been shown in detail in the section above can be comprehensively described in the following way.

With the same amount of tokens provided as liquidity, Blueshift gives better portfolio performance when market conditions change!

When the price of ETH falls to $2000, LP losses on Blueshift after the arbitrage are -$20,341,798.77, which is significantly better than on PancakeSwap where Impermanent loss equates to -$23,404,674.11.

After this occurrence, when the price of ETH grows to $6000, LP revenues for Blueshift are $20,178,654.05, while for PancakeSwap they are only $18,092,839.33.

Likewise, Liquidity providers’ revenues or losses relative to the initial assets market value, for Blueshift — are even better. When the price of ETH falls to $2000, LPs’ impermanent loss is just -$341,798.77 compared to -$3,404,674.11 for PancakeSwap.

This staggering difference equates to a 1000 % decrease in Impermanent loss on Blueshift.

When the price of ETH grows to $6000, LPs’ relative revenue on Blueshift is $178,654.05, whilst for PancakeSwap there is no revenue, in fact, PancakeSwap users are incurred with an Impermanent loss that equals to -$1,907,160.67!

This concludes the scope of this article. Follow our social media channels to find out more about our technology, tech performance, our team, and everything in between!