♾️Burve BLP

What is BLP? BLP stands for Bonding-Curve Liquidity Pool, a concept introduced by Burve Labs in their academic paper.

Why BLP is an Innovative and Revolutionary DeFi (AMM) Theory: BLP offers greater flexibility and scalability, making it a significant advancement in DeFi.

AMM History: Order Book -> Liquidity Pool (Uniswap V2) -> Specific Interval Liquidity Pool (Uniswap V3) -> BLP

Comparison:

Order Book: Transactions are matched through bids and asks, with users acting as counterparties to each other. The downside is that during periods of low liquidity, trade execution can be slow and subject to high slippage.

Liquidity Pool (Uniswap V2): Liquidity pools use a constant product formula (Price Token A * Price Token B = C) to create a decentralized automated market maker (AMM). In this model, users trade against the liquidity pool itself, and liquidity providers (LPs) earn transaction fees. However, the liquidity utilization is low as liquidity outside the current price range is wasted, and there's a high risk of impermanent loss.

Specific Interval Liquidity Pool (Uniswap V3): Concentrated liquidity allows LPs to allocate liquidity within a specific price range, improving liquidity utilization within that range. However, liquidity becomes fragmented, creating arbitrage opportunities between different liquidity pools. For project teams, adding liquidity is complex, requiring multiple positions to achieve optimal distribution. For LPs, adjusting price ranges is cumbersome, as they must remove and recreate positions instead of flexibly adjusting a fixed position.

BLP (Bonding-Curve Liquidity Pool): In BLP, liquidity providers can set any liquidity distribution using a bonding curve and define rules for their liquidity through parameters and hooks. This allows for the automated market making of various asset types and expands the functionality of liquidity pools to more application scenarios.

• Customizable Transaction Fees: LPs can set individual fee parameters for different strategies.

• Customizable Bonding Curves: LPs can design the liquidity curve to suit their needs.

How BLP Solves Problems in Uniswap V2 and V3:

In BLP, liquidity providers can create flexible liquidity distributions (e.g., across the entire price range, single-sided ranges, or concentrated liquidity) using different curve parameters. They can adjust the liquidity price range without the need to recreate positions. Additionally, LPs can set independent fee parameters for their positions, catering to various LP strategies.

Example: ETH/USDT Pair

1. Bonding Curve Liquidity Pool Simulating Uniswap V2’s Liquidity Distribution: The BLP can mimic Uniswap V2's distribution, offering familiar liquidity behavior with added flexibility.

   
2. How Trading Works When an ETH Buy Order is Initiated: When a buy order for ETH is placed, the price of ETH increases from the initial to the current price. The buyer receives ETH, while USDT is sold into the contract.

   
3. Adjusting Liquidity with Simplicity and the Concept of Virtual Liquidity: The amount of ETH and USDT in the BLP determines the ceiling and floor prices, defining the tradable ETH price range on the curve. Both sides of the curve represent virtual liquidity. LPs can adjust their ETH or USDT holdings in their BLP at any time without burning the liquidity pool.

   

Handling Orders with Multiple BLP Providers Covering the Same Range: When multiple LPs provide liquidity for the same range, orders are executed in a manner that optimizes liquidity utilization and minimizes slippage.

Additional Info:

1, Scalability: BLP can be applied to various scenarios such as IDOs, Fair Launches, and trading, by setting different types of BLPs.

2, Support for More Asset Types: BLP also supports a wider range of asset types, including NFTs and SBTs, enabling decentralized trading for these non-standard assets.

More content update forthcoming...