Arrakis - Trustless Market Making Strategies on Uniswap v3

January 12, 2023

Over the past four years, the Uniswap Protocol has become an essential building block for DeFi applications to source liquidity from a secure, trustless, and efficient AMM. As the most popular DEX on Ethereum, the Uniswap Protocol supports a vibrant ecosystem of builders. We're launching a new series of blog posts featuring these teams, starting with Arrakis Finance.

Arrakis lowers the learning curve for market makers with tools to manage concentrated liquidity positions on Uniswap v3. Let's learn more from Kassandra, founder and CTO of Arrakis Finance.

What problems are you solving with Arrakis?

Kassandra: While traditional AMMs are simple and easy to use, they lack capital efficiency as liquidity providers cannot devise and carry out strategies that decide how and when their inventory should be sold. Concentrated liquidity AMMs like Uniswap v3 improve capital efficiency, but at the cost of greater complexity. Arrakis provides the best of both worlds - greater capital efficiency without sacrificing ease of use.

Arrakis is a trustless market-making infrastructure protocol to run sophisticated algorithmic strategies on Uniswap v3. Liquidity providers can utilize Arrakis Vaults to manage their liquidity in an automated, capital-efficient, non-custodial, and transparent manner.

How does it work?

Kassandra: A key primitive to Arrakis is its vaults. We recently launched Arrakis v2, which encodes vaults with several features, such as:

  • Multiple Concentrated Liquidity Positions: Construct any arbitrary combination of liquidity positions in a Uniswap v3 pool.
  • Cross Fee Tier Vaults: Enables liquidity provision across different fee tiers.
  • Fully Fungible: Wrapped using the ERC20 token standard, Arrakis vaults are composable with other DeFi protocols.
  • Non-custodial: Liquidity can only be withdrawn by the original depositor.

Can you give us an example?

Kassandra: Certainly! Arrakis is extremely versatile. Virtually any strategy can be implemented on it.

Take a pair of pegged assets, like USDC/DAI. Because most trades happen close to the peg, we'd want to deploy liquidity at the 0.01% fee tier. But, if the asset depegs, we may want to provide liquidity at higher fee tiers to compensate ourselves for any additional risk we incur in providing liquidity to a depegged asset.

Why did you choose to build on Uniswap v3?

Kassandra: We saw Uniswap v3 as a massive breakthrough for AMM design with all sorts of unexplored implications and possibilities. Uniswap v3 introduced the concept of concentrated liquidity to the AMM, which adds key features to massively amplify the capital efficiency of liquidity pooled -- but also creates a trade-off whereby LPs needed to be much more sophisticated by setting and adjusting custom price bands to concentrate their liquidity within.

Arrakis was born as a response to this trade-off, hoping to make best-in-class liquidity provision strategies accessible to all, even those who aren't necessarily experts on market making. At Arrakis, we have a lot of respect for and belief in the Uniswap v3 protocol. We think it's fascinating, and we hope our tools help the protocol grow and mature.

How was building on top of the Uniswap Protocol?

Kassandra: Building on top of Uniswap v3 can be enjoyable and rewarding, but it is not for the faint of heart. In the early stages of development with Uniswap v3 we encountered some issues with Solidity v0.8+, but the Uniswap team helped us solve them. The documentation, especially the NATSPEC in contracts, was very helpful. While we don't use the SDK frequently, we have found it useful as a reference when creating our projects. Despite its increased complexity compared to previous versions, the wide range of potential applications it unlocks makes the complexity worthwhile.

Where can we learn more about Arrakis?

Kassandra: Check our documentation, Arrakis v2 announcement, PALM announcement, and the app itself!

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Disclaimer: Arrakis is a Uniswap Labs Ventures portfolio company. Certain information contained here has been obtained from third-party sources, including from portfolio companies of Uniswap Labs. While taken from sources believed to be reliable, Uniswap Labs has not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. In addition, this content may include third-party advertisements; Uniswap Labs has not reviewed such advertisements and does not endorse any advertising content contained therein.

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    What problems are you solving with Arrakis?
    How does it work?
    Can you give us an example?
    Why did you choose to build on Uniswap v3?
    How was building on top of the Uniswap Protocol?
    Where can we learn more about Arrakis?
    Start Building on Uniswap Today!