Research Update #1
Research Updates from CashmereLabs
We are excited to share the latest research updates from the past two months. Our team has been diligently working across various areas to optimize cross-chain swaps, and here we present our findings by area:
1. LVR Capturing
Loss-versus-rebalancing (LVR) is a crucial metric in automated market maker (AMM) protocols, quantifying potential losses for liquidity providers (LPs) due to arbitrage opportunities when asset prices within the AMM lag behind true market prices. Unlike impermanent loss, LVR offers a precise evaluation of value leakage to arbitrageurs.
For instance, LPs in the ETH-USDC pool on Uniswap v2 experience a daily loss of approximately 3.125 basis points (bps) to LVR, equating to an annual loss of around 11%, given a daily volatility of 5%.
LVR poses a significant challenge to scaling current AMM models. To address this, we explored two approaches:
- Applying the FM-AMM and uniform batch price model by a literature review of COW Swap to the cross-chain space. Despite extensive simulations, this approach did not significantly enhance user experience.
- Deploying the Cashmere Rollup to capture LVR or MEV profits at the network level. By implementing MEV taxes on priority fees, we aimed to redistribute MEV profits to liquidity providers. Simulations showed that this approach greatly improved user experience, as transactions could be processed without delays, and the entire process could be abstracted from the user. Cashmere liquidity pools generated a surplus for liquidity providers (LPs) during the simulation period. The results showed that the surplus increased most during times of high volatility. By the end of the simulation, the absolute surplus for LPs was approximately $40 million. In relative terms, this surplus increased to roughly 25% over three years, which corresponds to an annualized surplus of about 7.7%
2. Cashmere Omnipool Bonding Curves
Our research into bonding price curves for Cashmere’s cross-chain liquidity pools aims to identify the most efficient curves for liquidity providers. Cashmere pools enable users to swap any asset for another within five seconds. Promising results for cross-chain stablecoin AMMs show near-zero impermanent loss and near-zero-LVR, along with the activation of single-sided liquidity provision. Work is ongoing to enhance efficiency for cross-chain AMM pools involving volatile assets.
3. Intent & Solver Integrations
To facilitate sub-five-second cross-chain swaps and enhance user experience, we integrated intent and solver mechanisms with our liquidity pools. Users can now execute swaps with minimal gas fees (around 100K gas) and within 5–10 seconds. Additionally, we have pioneered guaranteed intents, allowing users to utilize liquidity pools directly if no filler completes their intents. This hybrid approach ensures an optimal user experience by combining intents with liquidity pools.
4. New Network Integrations
Cashmere was previously operational on 8 different EVM networks on testnet. Recognizing the market’s need for EVM <> non-EVM cross-chain swaps, we expanded our research to include non-EVM networks. Cashmere is now compatible with multiple-VMs, including TON, Solana, Tron, Movement, and Berachain.
5. What’s Next?
We understand that our research and development processes can be demanding for our community. However, we are committed to achieving the best infrastructure through a research-driven approach. Future efforts will focus on further research and integration to deliver the best cross-chain user experience. Security remains a top priority, and we are implementing methods like pre-crime and real-time monitoring.
We do not plan an immediate token launch, as we aim to complete application and user adoption first.
Our mainnet launch is planned for 2025.
We deeply appreciate our community’s support.
Thank you for being with us on this journey.
