Advanced Blockchain (AB) invested in Maverick Protocol’s seed round which closed in June 2021. Since completing the seed round, Maverick has continued to scale its operations and development, and recently closed a strategic round to raise an additional $8 million. AB recognized early that the novel approach Maverick employs in both the spot swap and derivatives markets through its sophisticated AMM / vAMM solves a critical problem. We are excited about the introduction of their Maverick AMM technology, and the new developments it will bring.
Maverick, a decentralized leveraged trading platform
Maverick is a decentralized leveraged trading platform. The team utilized their seed capital to build the Maverick AMM, which automatically concentrates liquidity around the time-weighted average price (TWAP). The Maverick AMM uses a TWAP algorithm that matches the execution and user price, as well as a distribution curve that shifts liquidity to follow the TWAP to enable seamless and immediate spot swaps. This sets them apart from other DeFi trading platforms within the swaps market, as they are able to offer derivatives for exotic token pairs that are otherwise unavailable. More than 50% of crypto trading volumes are represented by derivatives, and the decentralized perpetuals market also continues to grow in volume specifically. This indicates massive demand for derivatives in DeFi, but decentralized exchanges (DEXs) are currently unable to rival the capabilities of more traditional and centralized markets. DEXs provide superior prices for derivatives and represent the long-term future of DeFi that better aligns with customer incentives. However, they are constrained by liquidity issues in the number of pairs they can support; decentralized leveraged trading platforms provide up to 30 trading pairs, while centralized platforms provide hundreds.
AB’s thoughts on Maverick’s revolutionary AMM technology
Advanced Blockchain, as an early investor, continues to support the Maverick protocol. The Maverick protocol expands trading pair options to allow DeFi to better compete with their centralized equivalents and enables DeFi’s capabilities to expand beyond its current remits. We believe the protocol is headed by the right leadership and is well-positioned to become a leading decentralized leveraged trading platform. Notably, their newly introduced Maverick AMM technology demonstrates their innovative progress in the space, through functionality that eases liquidity burdens and expands trading pair options available for users
Ultimately, Maverick is positioned to become the next-generation decentralized trading platform that includes trading pairs that are not currently available on centralized exchanges (CEXs). Due to the use of the Maverick AMM, Maverick is also able to provide superior prices and higher yields for liquidity provision (LP) than are available on CEXs, and other DEXs.
How Maverick solves challenges of liquidity, liquidity provision and price impact
Concentrated liquidity is Uniswap v3’s primary novel innovation. In most DEXs and the Uniswap v2 model, liquidity is evenly distributed for a token across what amounts to an infinite price range. This liquidity is largely wasted as only a portion of that price range is ever used. As such, concentrated liquidity allows liquidity providers (LPers) to segment the price range they want to provide liquidity for, which gives them higher returns and deepens liquidity in those ranges.
The challenge is that LPers must perform this liquidity concentration themselves. They must manually change the price range constantly, to reflect what they believe to be the best range as the asset's price changes. This is laborious and requires knowledge of the data landscape to ensure optimal allocation. As a consequence, concentrated liquidity often does not overcome impermanent loss (IL) for LPers; one study found that IL exceeded profit for the majority of LPers on Uniswap v3. This is because concentrated liquidity only provides liquidity to a narrow price range. This increased capital efficiency resultantly amplifies IL, as in spite of the boosted fees, users are able to withdraw significantly less from the pool if the price changes by even a marginal percentage as it falls outside of the specified range. As such, it fails to sufficiently address liquidity issues and disadvantages retail users who do not have the time, resources, or sophistication to manage complex DeFi frameworks.
Maverick solves the challenge of liquidity, user access, and the current state of liquidity provision, through its Maverick AMM mechanism. Its AMM uses an innovative mechanism based on the swap orders placed by traders, using those orders as a signal of when to move the liquidity distribution. As traders swap and move the price, this acts as a reliable signal that the intrinsic value of the asset has moved as well. In this case, the liquidity distribution likewise also moves to support the new price range. The Maverick AMM gives retail investors the same abilities sophisticated investors have and moves the price range to which LPers provide liquidity in order to follow the price of the asset. As a result, this blunts the increased impact of IL inherent to concentrated liquidity.
This solution is hands-off for users and creates a more efficient market. LPs are able to select their fee tier, as well as their distribution width, with a wider one for volatile assets and a smaller one for those more stable. Slippage is lowered by shifting liquidity, deepening the pool of liquidity for assets across a relevant price range. This in turn provides higher fees to LPers to improve liquidity incentives. Through Maverick, LP positions no longer represent a bespoke strategy, but instead denote a share of the Maverick pool. This enables LP positions to exist as fungible ERC20 tokens, which allows for a much higher degree of composability across DeFi protocols. LP tokens can therefore be traded, exchanged, compounded, and used dynamically. Most importantly, LPing becomes a profitable venture as the challenges of IL are overcome. Ultimately, Maverick will function more effectively than individual investors due to the AMM’s algorithmic optimization. The Maverick AMM is the technological advantage that allows Maverick to be more liquid, offer greater choice, and provide superior pricing.
Advanced Blockchain believes Maverick AMM can revolutionize decentralized trading
Advanced Blockchain made their early investment in Maverick in recognition of the saliency of the problem it solves. The R&D team Maverick has assembled is well equipped to execute and deliver the Maverick protocol as the next generation of decentralized trading platforms.
Maverick provides a novel decentralized trading platform to DeFi, which has its capability bolstered by the introduction of their AMM technology, and is competitive with centralized alternatives.
Maverick enables access to mid-cap and emerging small-cap tokens sought by users which are often unavailable on CEXs and other DEXs, and where some of the greatest potential for returns lie. In addition, LPers are able to find high yield-bearing liquidity provision opportunities for any ERC-20 token. This process is autonomous, and as a result accessible to users of all size and sophistication.
Maverick recognizes that DeFi needs a spot swap and leveraged trading platform that provides a superior product through decentralization. It also understands the importance of liquidity, and the need to align with yield incentives to attract liquidity. Given the enormous demand for spot swap and derivatives, Maverick will be positioned to capture enormous trade volume.
About Advanced Blockchain
Advanced Blockchain AG is a venture builder and investor in the blockchain industry with an extensive team of analysts, developers, programmers, economists, mathematicians, and marketers dedicated to developing the future of Web 3.0. Group-wide, the team consists of more than 200 members, covering various disciplines enabling the firm to innovate in different ecosystems of the industry.
For more information about Advanced Blockchain and our various projects and investments, please visit: https://www.advancedblockchain.com/.