Product Goal

This section provides insights into what drives us, what we aim to accomplish, and how our platform contributes to addressing your needs and challenges.

Simplified TLDR Our goal is to maximize the efficiency of liquidity by focusing on extracting value from volatility (Arbitrage) through our Privatized Order Flow model, rather than the current approach that emphasizes extracting value from fees (standard AMM model). Toxic Order Flow (TOF) and Impermanent Loss (IL) have resulted in protocols undertaking unsustainable processes for incentivizing liquidity provision. This has created a massive problem in DeFi. Users now receive minuscule 'real yield' from swap fees alone, and as TOF and IL intensify, protocols are forced to take unsustainable approaches to retain sticky liquidity. This results in rapidly deteriorating token prices due to high inflation and heavy reliance on foundational grants. We're here to flip that narrative on its head.

The impacts of Toxic Order Flow and Impermanent Loss have significantly contributed to the decline in dominance of decentralized exchanges (DEXs) within the DeFi sector. The loss in DEX TVL & thus fees is primarily derived from the inability of liquidity provision platforms to outperform losses from toxic flows without relying on unsustainable token incentives.

Decline of Balancer fees over time due to over exposure to impairment loss & toxic flows

The choice is yours: Arbitrage or be arbitraged!

The primary goal of Private Pools Network is to overcome traditional AMM Systems' limitations by internally executing arbitrage rebalancing to provide an improved risk-return profile to liquidity providers. Index Funds currently hold nearly half of the total market share of traditional markets. However, in Decentralized Finance, the popularity of index fund pools seems relatively lacklustre.

It cannot be denied that the risks of underperformance against LVR (Loss-Versus-Rebalancing) due to Toxic Flows and Impermanent Loss play a significant part in making various potential index compositions obsolete. Private Pools Network aims to address the issues blocking the generalized use of decentralized interest-paying index funds by capitalizing on toxic flows and monetizing them in favor of our liquidity providers.

In simple terms, The Private Pools Network objective at launch is to sufficiently improve the returns profile to mitigate Impermanent Loss risks in traditionally toxic liquidity pools, thus allowing Liquidity Providers to generate returns on their assets, while overperforming the LVR benchmark (Milionis, J., Moallemi, C. C., Roughgarden, T., & Zhang, A. L. (2023)).

The long-term goal of the Private Pools Network Protocol is to entirely address the Toxic Flow and Impermanent Loss issue through trading engine and profit distribution optimizations capable of allowing the retention of value from toxic flows back to the Liquidity Providers while charging a protocol fee for mean reversion trades, which are inherently nontoxic and profit-generating.

This design aims to address the Impermanent Loss issue entirely, adequately protecting Liquidity Providers from Impermanent Loss risks and allowing for the monetization of typically considered toxic index pool compositions. The ultimate objective is to create yield-generating distributed risk investment vehicles.

Achieving the goals defined above could target the TVL, which left AMM architectures due to Impermanent Loss risks.