Direct Pool-to-Pool Transfers: Curve TriCrypto LP Tokens Have Been Added to Our PoC

Above: A depiction of our offering. Mosaic users are able to move liquidity providing positions from one Curve pool to another by swapping their TriCrypto LP tokens on Mosaic.

Our Proof of Concept (PoC) of our cross-layer asset transferral system, Mosaic, is live — and it is teaching us a lot about the landscape of cross-layer liquidity provisioning (LPing).

We are reopening deposits into our layer 1 (L1) LPing vault in our PoC to support TriCrypto. This allows us to experiment with direct pool-to-pool transfers of liquidity positions on Mosaic, allowing for users to move their positions in Curve between Polygon, Arbitrum, and mainnet.

How will pool-to-pool transfers work?

We are enabling users to add Curve TriCrypto LP tokens to our PoC, which allows for users to move their positions to be ported from one Curve pool to another on a different L2 (currently: Arbitrum and Polygon):

This deposit period is live for TriCrypto LP (and aTriCrypto LP, its form on Polygon): these tokens can be deposited within the next 3 days into our L1 vault to support liquidity provisioning. After these three days, swaps between these assets will go live.

What have we learned from the PoC so far?

With our PoC live for Polygon, Arbitrum, and mainnet asset transfers, we have realized that there is a significant difference between the earnings on providing liquidity across the different layers. As an example, based on our calculations, being a liquidity provider in the TriCrypto Curve pool on Polygon would yield 4% APY, versus the Curve pool for TriCrypto on Arbitrum that would yield around a 2% APY. On top of this, our calculations on the theoretical maximum (being 100% allocated to the pool at any moment which has the higher fees — which is not practically feasible) shows a return of 1,100%. From these results, we deduce that an active strategy, where funds are allocated based on forecasted activity/volume, should aim to capture a return between 4% and 1,100%. Or in other words, a lot of yield is left on the table by staying passive and not using an active strategy supported by Composable’s technology.

This analysis in yields makes it clear that users should definitely be interested in moving their Curve position from one layer to another. This arbitrage opportunity is an exciting one, and one we see across the cross-layer ecosystem that we will be exploring and illustrating for our users.

What is TriCrypto?

TriCrypto is a liquidity providing token (LP token) awarded to represent users’ deposits providing liquidity on Curve Finance. This essentially provides liquidity for swaps between certain assets.

Notably, TriCrypto exists as TriCrypto on Arbitrum and mainnet, but as aTriCrypto on Polygon. Their underlying assets are different, with TriCrypto being backed by USDT, wETH, and wBTC, and aTricrypto being backed by these tokens as well as DAI and USDC. Because exits onto Polygon will therefore require swapping from TriCrypto to aTriCrypto, users of Mosaic should expect marginally fewer LP tokens for exits onto this particular layer 2 (in the range of 1% or so).

The power of porting liquidity providing positions cross-layer

Currently, the process of users moving their LP positions cross-layer is subpar.

Specifically, to move an LP position cross-layer (before the advent of Mosaic), a user must unbundle their LP position, send it through a bridge, and then re-stake it there — and this must happen manually each time a user sees a more valuable opportunity on another layer.

We are thus actively working to build a mechanism for cross-layer fee arbitrage, powered by Composable’s software development kit (SDK). This will allow users’ LP positions in Mosaic to be automatically moved for them, based on whatever parameters they choose, helping them maximize APY.

As we continue to learn more about the novel opportunity of cross-layer LPing, we will keep the community updated to ensure you are able to make the most informed decisions.

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