Hey folks, I think we can pretty much all agree that even if you think we haven’t hit the bottoms (yet), we are probably much cl

Hey folks, I think we can pretty much all agree that even if you think we haven’t hit the bottoms (yet), we are probably much closer to the bottoms now then we are to the tops. That being said, I suspect that for the next several weeks (if not months) the crypto market is going to continue to crab sideways for quite some time. If you’ve followed my other articles, you’ll know I normally don’t focus on LP’s with alts — the main reason for this is due to impermanent loss. But assuming that we really are going into crab season, I now want to gain some exposure into some of the altcoins that I believe are going to make it big whenever this bull market finally kicks into gear.

As I’ll breakdown in the following sections, Revert Finance has built an incredible easy-to-use platform that literally cracks and decodes which liquidity pairs can be the most lucrative, giving real data with back-testing corresponding to which fee tier/price range for the assets you’re wishing to LP.

Uniswap, and why I haven’t joined an LP until now

What is Uniswap: To preface, I’m not going to go into a whole lot of detail into Uniswap because as one of the mainstays in the cryptoverse, there’s tons of videos/tutorials/articles on Uniswap that are super easy to google. However, I will point out that  is by far the largest AMM/DEX, trading with the most daily volume by a longshot:

As you can see from the graphic above, Uniswap has more daily volume in transactions than the next 10 DEX’s have…combined.

Why haven’t I gotten involved until now: Uniswap, especially Uniswap V3 can be extremely confusing. To be more specific, setting up a Uniswap V3 pool is relatively easy, but knowing how lucrative your pool may be is extremely confusing:

As you can see above, there’s several different variable factors that can significantly change the rate of return on your assets. These include:

1. The actual tokens you select for the LP (duh)
2. Fee Tiers (0.01%, 0.05%, 0.30%, 1.00%)
3. Max & Min price range

Through a process called “Concentrated Liquidity, all these different factors make up why Uniswap V3 is so capitally efficient. Essentially, trading liquidity is partitioned into different selected price ranges, allowing liquidity providers to pool their liquidity at prices ranges where they hope to see to be the most utilized + the most profitable.

As efficient as using Concentrated Liquidity might be, without looking at historical data it’s rather difficult to gauge what variables you should enter, and how the variables can impact your returns. For this very reason, up until now I’ve stayed away from the V3 pools, because personally I would rather put my assets where there’s a bit more predictability and simplicity in calculating my expected returns. This is where Revert comes in…

How Revert Finance makes Uniswap V3 more predictable

Revert Finance is a platform that allows you to open LP positions on Uniswap V3 (also Uniswap V2 and Sushiswap), but allows you to run backtests to see how much your potential LP can generate. Take a look at a 30-day backtest on the WETH/USDC LP on Optimisim for example:

As you can see in the graphic above, Revert provides multiple data points including fees accrued, impermanent loss, and APRs. By plugging in different variables, it’s relatively easy to see that the variables do matter. For instance, if for the MATIC/USDC LP on polygon, if you simply change the fee tier from 0.05% to 0.30% the APR nearly halves:

By being able to backtest your LPs using different parameters, users are able to gauge the profitability of their LPs, making it much more predictable for how lucrative their returns might be.

Additional features of Revert Finance

There’s two bonus features to be aware of when using Revert, and that’s auto-compounding as well as well as reward incentives:

Auto-compounding: If you’re like me and are wanting to stack your rewards for maximized returns, then it would make sense to opt in to auto-compound. As you can see from the graphic above, auto-compounding has enhanced my returns on the WMATIC/USDC pool by an additional 35.57%. Once again this feature is optional, but Revert Finance currently has even more reward incentives for certain pools (i.e., like with $MATIC) where you will earn additional rewards if you decide to opt into auto-compounding. This leads me to the next added benefit…

Reward Incentives: There are currently extra rewards given out for certain pools if you open up auto-compounding LPs on Optimism 

These incentives are only available for a limited time, so if you’re wanting to dabble into LPs yourself and see how Revert Finance works, now might be the time to generate even more APR on top of the already high APRs that you’re already getting from the LP itself.

To note, Optimism rewards have been given out since November 7th and will continue on well into 2023. These rewards are spread out over 3 different periods, the 2nd period (ending in January) which we are currently in 

I can say from experience having opened up LP positions in December, that I still have a rewards APR on my WETH/USDC pool at 61.47% that extends to January 12th, 2023:

The 3rd period start date has not been officially announced, but will most likely start by the end of January 2023. Regardless of what period you enter, in order to get Optimism rewards incentives, you’ll be eligible by entering any auto-compounding LP on Uniswap V3 via Optimism.

On Polygon there are currently two different incentives with different sets of requirements— one for staking in LPs via a time-vested “v3 staker”, the other providing rewards for having an auto-compounded LP position for any $MATIC paired pool. I’m currently participating in an auto-compounding pool and getting some pretty insane rewards:

Risks to consider:

There’s a couple of things to consider when entering any LP, let alone Revert or Uniswap, and that’s with impermanent loss (IL) and smart contract risk.

Impermanent Loss: With IL, the market could always drop or pump, meaning that for better or worse, Altcoin you have linked in your LP won’t feel full the profit and/or loss depending on the price action of the token that makes the second half of your LP. Conveniently when you run a backtester on Revert, you’ll actually be able to see what the historical IL-price impact has been on any LP, a data point hey have under “divergence_pnl_in_USD”:

Contract Risk: Personally, I consider the Ethereum blockchain to be one of the most secure out there, but that doesn’t mean that Revert or Uniswap is impervious to smart contract risk. Thankfully, Revert has had a recent audit from August 2022, with only a couple of low-risk findings:

All this being said, please DYOR for the lowest risk way to hold on to your crypto is to simply self-custody.

Conclusion

If you’re wanting to take the first step into accruing your favorite alts while we’re crabbing throughout this bear season, Revert paints a pretty good blueprint for the easiest, low-risk way to stack and generate some pretty high APRs. And in a time where #realyield is extremely important, LPs and trading fees are probably the last major leg standing towards real yield generation.

Once again, thanks for reading. I may do a follow-up article to speak to some of the best LP strategies I’ve been able to find, but as you’ll find out if you play around with Revert’s backtester, the market can be extremely volatile and a high-return LP today might not be a high-return LP tomorrow. And as always, please be sure to follow me on twitter to read all about my latest findings and updates: https://twitter.com/CryptosWith

Disclaimer: None of this information is financial advice and is just speculation from me, a random guy on the internet. Please consider this for purely educational and entertainment purposes. As always, please do your own research or contact a financial advisor to find what investments might be best for you.