Ecosystem foundations form the backbone of the blockchain industry, offering tools and monetary support for developers.
Challenges of Siloed Ecosystems
Liquidity is fundamental for the smooth operation of protocols and applications, underpinning activities like trading and lending. It provides the necessary market depth for transactions to occur without undue delay or excessive price impact.
When liquidity is fragmented, spread thinly across numerous platforms, the repercussions are serious: trading becomes inefficient and expensive, and financial services lose their competitive edge. Users faced with these fragmented pools experience the negative effects directly through poorer trade execution and may shift their activity to platforms where liquidity is more concentrated and reliable.
In such a scenario, a protocol deprived of ample liquidity is significantly disadvantaged. The absence of a unified liquidity pool doesn't only inconvenience users in the short term but also suppresses the protocol's growth. It can reduce the attraction for new users and investors, limiting the protocol’s reach and its ability to leave a mark on the wider blockchain ecosystem.
Entangle's innovative approach to resolving liquidity fragmentation comes in the form of Liquid Vaults, which act as universal liquidity providers across various Web3 applications. These versatile vaults are designed to support a broad range of services, from lending and borrowing platforms to derivatives markets, addressing the widespread need for accessible liquidity beyond the confines of decentralized exchanges (DEXs) and bridges.
One of the pivotal benefits of Liquid Vaults is their ability to refine the yield-generating landscape. Traditionally, users would earn yields through participation in DEXs. However, Liquid Vaults extend this by allowing users to capitalize on yields from secondary protocols. These secondary protocols have historically offered high annual percentage yields (APY) to stay competitive. Liquid Vaults could allow secondary protocols to lower direct yield rates by offering users a combined return: initial liquidity provider rewards followed by additional earnings from Liquid Staking Derivatives, aiding a more sustainable yield ecosystem.
The primary advantage of deploying Liquid Vaults is their contribution to strengthening liquidity pools, which is beneficial for both DEXs and the broader blockchain ecosystem. For end-users, this translates into enhanced capital efficiency and amplified yields. Protocols that once struggled to attract and maintain sufficient liquidity can now tap into Liquid Vaults to increase their Total Value Locked (TVL), allowing them to diversify their offerings and attract a wider user base, thereby strengthening their value proposition in the market.
Entangle's Liquid Vaults are positioned to unlock a new refinancing market for yield assets, seamlessly connecting different facets of the DeFi landscape. By offering a more streamlined liquidity solution, they aim to enhance the decentralized finance experience, promote greater integration among platforms, and facilitate a unified ecosystem.