Sushiswap V2 Single Sided Exposure and Impermanent Loss mitigation
Single sided exposure, and impermanent loss mitigation. I started down this path with yswap originally. Back then, the idea was simple, introduce a transfer token that represents the USD value of the assets being deposited.
If you deposit 1 ETH it mints 1000 USD and supplies them to the AMM. While in practice this seemed simple, it led to a myriad of potential problems and economic exploits.
7 months later, and roughly ~14 revisions, from yswap, to stable credit, and now Single sided exposure and Impermanent Loss mitigation, or sil.
The core concept is still the same as the original iteration of yswap; deposit an asset, and a representative value of said asset is introduced to the system. The core difference here, is that the asset is not pegged to USD, but instead has an lower bound of USD. So the value can be higher, but not less.
While impermanent loss can still exist during volatile times (and withdrawals and deposits should be avoided when the pair ratio is imbalanced to the oracle ratio), they are significantly reduced thanks to a interest free system loan.
Instead of minting the representative asset value, an interest free debt is created equivalent to the value at time of deposit. This debt is settled at time of withdrawal. (Inspired by Alpha Homora)
Lastly, each trade between single sided & IL protected pools incurs a 0.2% fee. Each fee automatically market buys wYFI off of the market.
While we are very happy and excited with the early results of sil, there are still lots of further reviews required, as such we will not be making available a public UI in the near future and leave the interaction to advanced users that are able to identify and interact with the sil contract themselves.