Captain’s log:
- Terraform Labs (TFL) deployed ~$10 million worth of liquidity in 3 Astroport pools on Terra as it prepares for the upcoming AstroWars
- Liquidity was deployed in Astroport’s highly efficient passive concentrated liquidity (PCL) pools, which require less depth than existing XYK pools to achieve the same trade efficiency
- Liquidity deposits come as DEX aggregators begin tapping Astroport liquidity across Cosmos-based chains
Liquidity on Astroport surged by more than 54% on Tuesday, Nov. 14th, to $50 million+ after Terraform Labs (TFL) deployed ~$10 million on Astroport’s Terra outpost. Per their announcement, TFL added blue chip liquidity to three core pools:
- $4 million in the LUNA - USDC.axl pool
- $3 million in the LUNA - WBTC pool
- $3 million in the LUNA - WETH pool
With the fresh influx of liquidity, Astroport took the #31 slot among the largest DEXes in crypto by total value locked (TVL) per DeFiLlama, which tracks 1,000+ DEX protocols.
“This liquidity injection solves the cold start problem for the Terra ecosystem, providing ample liquidity for users to acquire and trade blue chip assets, and for developers to build powerful and exciting new DeFi applications on top of them,” said TFL CEO Chris Amani. “In addition, as DEX aggregators search for the best place to execute trades for their growing user bases, Terra will see an increase in transaction volume, leading to greater yield for LUNA stakers. Over time, liquidity on Terra will grow, and Terra will become the home of blue chip assets on Cosmos.”
Astroport’s PCL pools offer 2x-3x better efficiency than standard XYK pools. In fact, the Terra liquidity pools TFL deployed on will likely offer users the most efficient swap rates of any DEX in Cosmos for those assets.
That means DEX aggregators can access the liquidity in the background – even across chains via IBC – so users can get access to the best rates regardless of where they’re swapping.
With this new injection of liquidity, TFM’s IBC Swap, for example, could support cross-chain routes that integrate some of the pools where TFL deployed liquidity.
That would allow a user to trade a token on Blockchain A for a token on Blockchain B and get automatically routed through Astroport’s Terra outpost in the background (thanks to an intermediary, automated transaction).
Already today, users can use TFM to swap Stride Staked LUNA (stLUNA) on Stride for Neutron (NTRN) on the Neutron blockchain. As part of the swap, TFM routes stLUNA to the Terra blockchain, where it executes a swap (for ASTRO in this example) before forwarding those tokens to Neutron, where they’re again swapped for NTRN.
This form of automated, cross-chain swapping has always been a core part of the IBC vision, and it’s expected to continue to grow and impact more pools and DEXes throughout the Cosmos.
The dawn of PCL on Astroport
Upon its initial launch on Terra Classic, Astroport was once home to more than $1.8 billion in TVL. Today, the protocol is live on four Cosmos chains and counting – Terra, Neutron, Injective, and Sei – and it’s the largest AMM by TVL on each.
PCL, which rolled out first on Terra, is now getting deployed in stages on Neutron and Injective and is expected to launch on Sei soon, pending governance approval.
Each Astroport PCL pool is fully composable with other DeFi protocols, and several teams, including Apollo DAO and Eris Protocol, have launched or are actively developing leveraged yield farming vaults on top of Astroport liquidity.
Early tests indicate that PCL pools require anywhere from a quarter to 1/16 the depth of a constant product pool (XYK) to offer the same trade efficiency. That’s because PCL pools work much like stableswap pools. Rather than using a fixed pricing curve that amplifies liquidity at a 1:1 ratio, PCL pools use an advanced repegging algorithm to amplify liquidity at current market prices automatically.
The net result is pools that are dramatically more efficient and should outperform competing pools even with a fraction of the liquidity. That means they’re far more likely to be utilized by DEX aggregators. Unlike XYK pools, which have fixed fees, Astroport’s PCL pools also feature variable fees. As volatility increases, so too do trading fees to compensate for potential Impermanent Loss (IL).
Fees alone should be enough to attract LPs, but the upcoming launch of vxASTRO could drive yields even higher.
The rise of the AstroWars
As outlined in ARC-85, Astroport governance recently voted to move its governance and staking hub to the Neutron blockchain. In that agreement, Astroport contributors committed to launching Voting Escrowed ASTRO (vxASTRO) and a generalized Curve-style voting incentives protocol.
Astroport and Delphi Labs contributors recently proposed a more concrete design for vxASTRO with ARC-102 that includes the following features:
- ASTRO holders could stake ASTRO for xASTRO, then lock that xASTRO for vxASTRO
- vxASTRO lock-ups would be indefinite while allowing users to unlock their tokens at any time with a 2-week waiting/unlocking period.
- All vxASTRO holders would receive 1:1 voting power on general governance proposal (i.e., their votes would be equivalent to normal xASTRO votes)
- vxASTRO holders alone would have the ability to vote on which pools receive ASTRO rewards
- A Curve-style voting incentives or “tributes” protocol would be launched, which would allow third parties to offer up token rewards (in any asset such as USDC, NTRN, OSMO, ATOM, etc.) exclusively for any vxASTRO holders who votes for emissions to go to a specific pool
On Terra Classic, protocols knew the original model for vxASTRO could allow them to influence liquidity flows on Astroport. That meant that even before the launch of vxASTRO, at least five protocols (ApolloDAO, Orion, Reactor, Retrograde, and Spectrum) publicly announced they were accumulating ASTRO in what was dubbed the AstroWars.
With vxASTRO’s new design, accumulating ASTRO could be even more powerful, thanks to the built-in tributes.
For example, Votium, the vote-buying marketplace for the Curve ecosystem, has facilitated at least $287m worth of vote incentives on the protocol, providing a substantial benefit for veCRV and vlCVX holders. And Velodrome’s own vote-buying marketplace generates ~5.4x more yield for voters than trading fees (with $25m in incentives already going to voters vs $4.6m in trading fees).
The AstroWars also take on new meaning in Astroport's new cross-chain design. Whereas previously it was Terra protocols fighting to incentivise their token, now it's also L1 blockchains that will want to ensure their outpost has the most liquidity.
That means every chain where Astroport has an outpost could become a candidate to accumulate ASTRO by buying or farming the token. Then, those L1s could lock that ASTRO for vxASTRO and vote to incentivise their native token pools or the pools of leading protocols on their chains – all while potentially collecting additional rewards in the form of tributes.
Higher APYs lead to more liquidity, which leads to better trading efficiency, more volume, and greater fees for LPs. Terra has already positioned itself as a contender in the renewed AstroWars, announcing a purchase of 22.4M ASTRO to direct incentives toward Terra project liquidity pools and help shape the future of Astroport.
Learn more about the proposed design for vxASTRO in the latest forum post here. Then, check out TFL’s newly launched liquidity on Astroport’s Terra outpost: terra.astroport.fi/pools.
The future of cross-chain swapping has arrived 🖖
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DISCLAIMER
Remember, Astroport, Terra, Neutron, Injective, and Sei are experimental technologies. This article does not constitute investment advice and is subject to and limited by the Astroport disclaimers, which you should review before interacting with the protocol.
