Warp Finance Adds Advanced Functionalities: Uniswap V3 Compatibility, Lending Pool Generation and Layer 2 Asset Transfers
Warp Finance is excited to announce its plans to add three new functionalities: Uniswap V3 support, lending pool generation, and layer 2 asset transfer facilitation. We have opted to take on these new functions, in addition to our existing function providing loans on LP tokens, as they address large unmet market needs within DeFi. Continue reading to find out more about our plans to implement these new features, and to understand why they are so beneficial to DeFi users.
Uniswap V3 Compatibility
Warp Finance already accepts LP tokens from Uniswap V2 to collateralize loans on its platform. However, a major change is coming with Uniswap V3: LP tokens will now be non-fungible tokens (NFTs). Warp is staying ahead of this update in order to continue seamless functionality with Uniswap LPs as they transition to V3, and has built compatibility with this new feature of Uniswap. This new coding is presently being audited, and will be ready for Uniswap V3 launch.
Lending Pool Generation
Many different DeFi protocols have enabled users to deposit assets as collateral in order to borrow other digital assets (think: Aave and Compound, to just name a few of the biggest options). While these protocols have garnered immense popularity, they still face a number of limitations. These include the inability for users to generate lending pairs, risk spread across the entire protocol, inflexible oracles, illiquid and unspecific interest rates, and unnecessarily high gas fees.
Warp intends to resolve these issues with a protocol allowing any user to create lending pairs allows anyone to create lending pools. Specifically, Warp will allow users to generate lending pools with a similar structure to liquidity pools. Any two assets can be paired in this pool: users will be able to specify the layer, pair, and asset type. Lending and borrowing to occur in either direction between these two assets.
This isolated lending pool infrastructure has many benefits when compared to existing crypto lending protocols. First of all, risk is isolated to specific lending pools, and not spread across the platform. That way, transparency is optimized and users are able to consider the risk level of each pool they enter into, selecting for themselves what they are comfortable with. Further, the isolation of pools enables the margin shorting of any token; as there is the potential for thousands of lending pairs with any particular token, users can go margin short on a large variety of tokens. At present, this function is not widely available, but margin shorting on tokens is highly desired by the community.
Another broad benefit of Warp’s lending pools is its dedication to optimizing all processes. This includes our flexible oracles. Specifically, a new oracle can be selected for each pool, allowing for a higher degree of customization. Interest rates are additionally improved in Warp’s lending pools, as our platform seeks to optimize supply to borrow rate to avoid utilization hitting 100% and borrowing being deactivated, which has happened to other protocols. We accomplish this by optimizing interest rate in response to utilization, slowly dropping as needed to either reach 0 or until the supply has left or borrowers have arrived, or doing the opposite when utilization goes too high. These parameters will also be customizable for each pool. Finally, our lending pools are optimized for low gas use, unlike most lending and borrowing protocols in the DeFi space. This keeps our gas prices much lower, specifically optimizing our contracts to reduce the types of assets supplied/borrowed, thus reducing gas.
Overall, this means that users will have the ultimate freedom in DeFi loans, helping them maximize capital efficiency and freely carry out value-generating processes within the field.
Efficient Value Transfer Across Layers 1 and 2
Layer 2 technology is increasingly being recognized as the future of the blockchain and DeFi industries. In recent months, many large public blockchains have been overloaded with transactional data, resulting in slowdowns and high gas fees. As a result, a number of protocols and chains have turned to layer 2 for solutions. Layer 2 acts as a second layer over the main blockchain, operating in tandem but enabling computations to be performed in this new location, decreasing the burden on the main chain. These methods resolve scalability issues that are straining many prominent public blockchains, such as the Ethereum chain that is at the core of the DeFi industry.
As a result, layer 2 tools are the hottest new technology. Layer 2 has been such a successful solution that even Vitalik Buterin, founder of Ethereum, has said that Ethereum is “all-in on rollups” to fix these pressing problems. The most promising layer 2 solutions right now are ‘rollups’ of various kinds. Rollups bundle multiple transactions on a separate chain together, prove their validity, and submit only the proof to the main chain. This cuts down on the individual verification time and while still maintaining the same degree of security.
Despite the creation of new layer 2 technology, this shift to a new layer is still in its early stages. Warp intends to be on the forefront of this transition, and has identified the movement of assets between layer 1 and layer 2 as a present pain point that it is well-positioned to address.
At present, layer 1 and layer 2 are still largely disparate. As these layers are distinct, layer 1 assets are not interchangeable for layer 2 assets, and vice versa. Therefore, it has been incredibly challenging to efficiently facilitate transfers of assets between layers. With Optimism, transfers from layer 1 to layer 2 can be quick, but transfers from layer 2 to layer 1 can still take a week or two. Withdrawing funds from Optimism is time-consuming because the rollup requires the finalization of the verification process for transactions to be completed in advance. These delays can be both annoying and financially damaging; the DeFi industry is incredibly fast-moving, with new projects and functionalities popping up every day, and with token prices often being volatile. Thus, users need flexibility with their funds, in order to generate the maximum value and protect against losses.
Warp is presently designing a solution to this issue without compromising on security. We are working on building a lending solution that allows users to deposit layer 1 or 2 assets and borrow assets along the other layer. We retain the advanced security and verification of present solutions, but the lengthy transaction times are completely avoided.
Warp’s cross-layer fully collateralized loans will let users seamlessly participate in both layers of blockchain without constantly having to shuffle assets back and forth. A huge benefit of this infrastructure is that Warp users will be able to continue to gain value on their layer 2 assets, while using lending to have immediate access to layer 1. Essentially, Warp’s solution frees up assets that would have previously been relegated to one layer only.
These new functionalities are just the tip of the iceberg for Warp Finance, as we seek to meet additional unmet DeFi market needs. Stay tuned for more updates about Warp and the benefits it delivers to users.
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