Protocol Owned Liquidity: how protocols use Arcadia Foundry to manage liquidity for their native token with automated strategies.
Protocols use Foundry to manage liquidity for their native token. Instead of renting liquidity through emissions or incentive programs, protocols deploy their own assets and let Arcadia's automations handle position management.
Arcadia migrates existing liquidity positions to an active Foundry strategy in a single transaction, ensuring there is never a liquidity gap during migration.
Strategies
A non-exhaustive list of strategies tailored for PoL:
Efficient Rebalancing for Capital Preservation
PoL deployments require regular re-calibration of position ranges to optimize for trading depth. Rebalancing is optimized for capital preservation, using organic yields to offset impermanent loss.
Inventory Rebalancing
Standard rebalancing can cause negative price impact when executed in size. Arcadia's tooling allows inventory rebalancing, which mitigates negative price impact.
Custom PoL Strategy
Custom strategies, such as padded distributions to support token price floors and increase depth in high-volume price areas.
Take Profit with Zero Price Impact
Withdraw assets from liquidity positions without direct price impact or temporarily removing the main liquidity position.
Structured Buybacks
Buybacks can be automated and executed in a structured way to maximise accumulation.
Yield
All yield comes from trading fees that traders pay when they swap through the underlying AMM pools. Staked positions (e.g., staked Aerodrome) earn token emissions rather than trading fees.
Earned fees and rewards can be auto-compounded back into the position or claimed to the protocol wallet via Compounders and Yield Claimers.
Risks
Protocol owned liquidity is exposed to:
Smart contract risks
Market risks
Impermanent loss
And depending if margin is used or not:
Interest rate risk (interest rate can exceed yields)
