At Burve, we've built a RehypothecatingStable Multi-Swap AMM. That's quite a mouthful, but in short, it's a way for AMM Liquidity Providers to provide liquidity and earn from multiple pairs of tokens at once with much greater capital efficiency and therefore much higher yields. For a guide on how to deposit, see .
Below we'll break down the details and risks of each piece.
Multi-Swap
A multi-swap pool means the underlying liquidity is made up of multiple tokens instead of just two like a normal AMM. In a multi-swap, any token can be traded for any other token in the pool. The more tokens there are, the more capital efficient it is for liquidity providers in the pool.
Example (How a 3-pool doubles your yield).
Let's say you think USDT, USDC, and DAI are very safe and want to earn yield from them. Using normal AMMs you'd provide liquidity to each of the USDT-USDC, USDC-DAI, and USDT-DAI pools. And if they all average 5% you'd earn 5% yield overall. Notice that half of your USDC is earning from USDT-USDC and half is earning from USDC-DAI.
But with a multi-swap, you provide liquidity to just one pool with one deposit. That deposit can use any of the tokens for any swap. This means the entirety of your deposited USDC is used for the USDT-USDC pair, but the entirety of your USDC is also used for the USDC-DAI pair! In comparison to depositing individually for each pair, you now have double the capital efficiency which causes you to earn double the yield! All of your USDC is earning 5% from USDT-USDC and 5% from USDC-DAI, all of your USDT is earning 5% both of its pairs, and all of your DAI is earning 5% from both of its pairs as well, giving you an average of 10%!
Our 16-pool gives 15x higher yields
Because Burve uses an analytic solution to stable swaps (which we'll get into later) compared to Curve's numeric solution, Burve can efficiently handle up to 16 tokens (and more in the future).
One key insight is that as the number of tokens grows, the number of tokens pairs in the multi-swap grows quadratically. With 3 tokens you have 3 pairs, with 10 tokens you get 45 pairs, and 16 tokens gives you 120 pairs.
The capital efficiency (a.k.a the multiplier on your yield) is calculated by taking the number of pairs, multiplier by 2 (because each pair gives yield to two tokens), and dividing by the number of tokens deposited. This conveniently comes out to be 1 less than the number of tokens in the multi-swap.
So compared to LPing for each of the 120 pairs individually on something like Uniswap or Curve, LPing with one deposit on Burve's 16-pool will earn 15 times more.
Subset LPing keeps you safe
LPing for 16 stables or LSTs all at once can be risky due to IL from de-pegs. So we designed the pool such that you can choose a subset of tokens to LP for. If can opt-out of LPing for any tokens that you think are too risky. For example, if you opt out of 2 tokens you would have a 14-pool which gives 13x capital efficiency.
The best part is that this doesn't fragment the pool. You'll still be in the same pool as the 16-pool, still earning the same yields (on the tokens you didn't opt out from of course), but without facing any unwanted risks.
Depeg Risk
As most people are familiar with, all stables and LSTs can depeg if the protocol/company backing them is compromised. Some tokens like USDC and USDT are very unlikely to depeg, while newer tokens may be more likely.
As with any LP position, if one leg of your position drops in value, then your entire position will drop in value. This is still the case with a multi-swap. For example, if any stable in your stablecoin multi-swap LP goes to 0.5 cents, your overall position might fall to 70% of its value (depending on multiple factors), and if the stable goes to 0 then your position also goes to 0. That is unfortunately how the vast majority of AMMs work and multi-swaps are no exception. In fact, they face this risk from multiple tokens. But all hope is not lost and we can do a lot to mitigate this risk!
Mitigation Strategy:
The best way to protect against depeg risk is to prevent swaps when it's clear a token has been compromised. The danger of depeg comes from the losses accrued by the AMM as it continues to buy the depeg'd token on the way down. Therefore we our own depeg oracle and from external security firms to halt buys in the depegging-token.
We also have a backup depeg oracle from on-chain sources like money markets which we'll discuss more in the rehypothecation section.
Subset LPing! This is a great way for users to completely avoid the risks of depegs in any tokens they consider risky.
Overall, by using depeg-oracles we can minimize the impact of any depegs. We'll lean on the side of being safe, which means we'll be willing to miss out on trading fees if it means we can avoid depeg losses.
Key Points
Burve can handle up to 16 tokens in one pool.
This gives 15x the capital efficiency of other AMMs.
You can LP for as many or as few of the 16 tokens as you'd like.
You only face Impermanent Loss for the tokens you choose to LP for.
Any IL caused by depegs is minimized through market halts triggered by depeg oracles.
Dynamic Concentrated Yields
Curve did a great job in popularizing stable swaps with their stable equation, but now they under-earn compared to LPs on modern AMMs offering concentrated positions despite having similar risk profiles. This is because concentrated positions also maintain a peg with minimal slippage but can be adjusted as the market evolves. For example, as a stablecoin matures, the peg should be be tightened to earn optimally.
That's why we opted for using a concentrated position more similar to Uniswap V3 than a traditional stable curve. The level of concentration can be adjusted through governance and is specific to each token. This means if a token becomes less risky over time we can tighten its concentration for higher yields which automatically tightens its peg with all other tokens in the multi-pool. And vice versa, if we want to mitigate risk and loosen the peg we can as well.
Range Selection
Concentration
Peg Price
Curve
Fixed by protocol
Low
Static
Uniswap V3/V4
Adjusted by User
High + Adjustable
Adjustable
Burve
Adjusted by Governance
High + Adjustable
Adjustable
Hassle-Free Concentrated Yield
In the current DeFi environment you have to be concentrated to earn significant yield on stables. Curve's stable swap equation is a way of synthetically creating concentrated liquidity, but unfortunately Curve is no longer sufficiently concentrated and as a result earns subpar yield. It now relies on token emissions to stay competitive. Uniswap V3 however, due to users ability to adjust ranges, has kept liquidity sufficiently concentrated and yields competitive. This makes sense because as a stablecoin become more established and reliable, we can rely on a tighter peg.
The downside of Uniswap is that users have to choose that concentrated range themselves, and for wrapped LSTs (which have a slowly moving peg), users have to adjust their range periodically or else they'll continually lose to IL.
Burve strikes a middle ground between the two. Unlike Curve, we now have much more data to work with when deciding which range to provide to and can pick a more appropriate concentration level. Burve's concentration is also adjustable by governance! So as a stablecoin evolves, we can tighten that range, or if a stablecoin is starting to destabilize we can loosen the range. And at the same time, Burve also handles any moving pegs. Now users don't need to pick any ranges themselves. This way users get the best of both worlds, a high concentrated yield without any of the hassle.
Concentrated Impermanent Loss
Concentrated liquidity is a great way to increase earnings and helps keep the peg more stable, but in the event of a depeg it will suffer large impermanent loss. This is in fact true of all stable swaps and concentrated liquidity AMMs including sub-par earners like Curve.
Therefore the two most important things is to:
Maximize returns for that level of risk.
Develop mitigation strategies.
At Burve we do both. If a depeged token will decimate an LP position anyways we might as well earn as much as possible when facing that risk. And at the same time, also employ circuit breakers, depeg oracles, and built-in safety measures to mitigate the losses in the event of a depeg.
Key Points
Concentrated liquidity and stable swaps face similar IL, but concentrated liquidity typically earns more due to its ability to quickly and flexible adjust ranges in an evolving market.
Burve uses a more concentrated liquidity approach but employs multiple circuit breakers, depeg oracles, and other risk mitigation strategies to limit IL risk.
Burve also handles moving pegs natively to prevent depositors from perpetually losing IL due to a slowly moving LST peg.
Value Accounting
Unlike UniswapV3 however, we created our "concentrated" position through a bonding curve mechanism called Value Accounting that provably approximates the constant curve equation but is simpler to calculate, manage, and scale up for a multi-swap. And most of all, it allows users to turn their concentrated LP position into a fungible token they can use in other protocols to unlock more utility and capital efficiency.
This means no matter what subset of tokens you decide to LP into, you can convert it into a fungible token you can swap, stake, lend, or LP with. Compare that with a UniswapV3 or UniswapV4 position which is non-fungible and remains stuck within a pool.
Fungible Within Burve
Within Burve, users can "extract" value from their subset it use it to redeem value from another subset that someone else has "extracted" value from.
You can think of "extraction" like un-staking, where you get a pseudo-stable value token from you LP position. Like a removed position, your extracted value no longer earns fees but can be used to redeem for value in any subset at any time. This lets us quickly and conveniently swap between different subsets but the true usefulness happens outside of Burve and in Quadratic Swap pools.
Fungible Outside Burve
Receiving fungible Value tokens (ERC20s) add an extra component of utility to Burve liquidity provisioning positions. Unlike non-fungible positions, these LP tokens can be used in vaults, money markets, exchanges, and more.
For example, you can post them as collateral to borrow against, we can build vaults that add extra utility, and most importantly you can use them for LPing in an extremely capital efficient way called Quadratic Swap Pools.
Quadratic Swap Pools
Quadratic swap pools throws the capital efficiency of an LP deposit into hyperdrive.
For must DEXs, they use a simple AMM that allows you to swap from one token to another. This means if you LP into that AMM, you're earning from a single token pair, a single "swap edge".
With multi-pools, instead of LPing for a single pair, you're now LPing for a quadratic number of pairs. If there are N tokens in the multi-swap, each of those N tokens can be traded for (N-1) other tokens giving you N * (N-1) edges.
Because your deposit is split among N tokens, we divide that out to get a capital efficiency of (N-1), meaning you earn as if your deposit was that many times larger. This property is extremely valuable and Quadratic Swap Pools extend that capital efficiency to beyond a single Multi-pool.
By LPing the value token of one Multi-Pool (like USD) against the value token of another Multi-Pool (like ETH), sans a depeg, you face a similar IL as other ETH-USD pools. But unlike them you're now earning from pairs between any two tokens in each of those pools. This means means if there are N tokens in one pool and M in another, you're now earning from N * (N-1 )+ N *M + M * (M-1) edges! This is a huge boost in capital efficiency and will become the most capital efficient way to farm LP yields in the future.
Key Points
Burve's Value Accounting method is a more efficient way of handling concentrated liquidity in multi-swaps.
Users can extract fungible LP tokens from their positions for bonus utility such as staking, lending, and more.
In the future, we'll have Quadratic swap pools which allow users to earn even more by using a combination of Multi-Pool deposits.
Rehypothecation
Tokens in an AMM are typically left on the smart contract waiting to be used in a swap. But the vast majority of those tokens are rarely touched. So instead, Burve puts those tokens into other yields source so they can earn while they wait which results in a constant passive yield for liquidity providers even when swap volume is low. Most of the time, we put those tokens in Money Markets to remain relatively liquid, even when earning yield. Even so there are a few important considerations.
Swap Availability
When rehypothecating, the most important consideration is to keep enough tokens available to actually support any swaps that come in. For example, if you just staked all the tokens in your AMM, then when someone tries to swap they'll have to wait for the unstake period before they get any tokens. That's a terrible user experience.
That's why liquidity money markets like AAVE or Morpho are a great choice. You can easily deposit and withdraw when need to support any swaps that come in. And if we're using money markets that are less liquid, we can simply leave some tokens out of the money market to ensure availability.
Finally, even when using well established money markets, it's a good idea to diversify your money market usage to further improve your ability to pull large amounts of tokens without locking any money markets.
Availability as a Depeg Oracle
Even with strategies like using multiple money markets for rehypothecation, there is the possibility that all tokens are simply borrowed out and we can no longer support the desired swap. In this scenario we would revert and prevent the swap and thats actually desired behavior.
Historically, the only time that a pegged asset has been entirely borrowed out of money markets like AAVE are during depeg events. Fortunately, that is precisely the time to not support swaps! In other words, we are effectively using money markets as a backup depeg oracle which prevents the pool from buying more of the depegging asset.
Of course we have our own depeg oracles but it doesn't hurt to have this extra added level of safety!
BGT emissions
As a Bera-native project, we consider how we can best capitalize on earning BGT. Each of the rehypothecation vaults are chosen with their BGT emissions in mind and help power the governance module and drive value to the Burve token.
BGT rewards are split in two: the BGT itself, and the validator rewards earned from staking the BGT. Here is how we optimize the earnings of both.
BGT is automatically staked through a liquid wrapper and validator rewards are automatically compounded back into the LP.
The wrapped BGT itself is also given as a reward to LPers. The exact emission schedule is based on governance similar to Curve's gauge voting. We think their mechanism of vote escrowing and gauge voting was a great way to build value for their token; however, emitting more of CRV was a mistake that counteracted the positive value they created. So instead we follow a similar mechanism but our reward emissions are done in BGT, thus keeping the supply of BRV capped. More details on BRV are coming soon.
The LP token itself will eventually be available for BGT staking. That is a separate utility and should not be confused with the BGT emissions earned from rehypothecation.
Smart Contract Risk
Like using any protocol, there is also contract risk to consider. This means both the protocol admins must be secure and the smart contract itself must be secure. This is why we only use yield sources that are well-audited, whose founders have trustworthy references, and are already trusted by the community at large.
Key Points
The AMM's tokens are actually stored on money markets to constantly earn additional passive yield for LPs.
Money Markets are used as a backup depeg oracle to mitigate depeg risk and IL.
Any BGT validator emissions from money markets are automatically compounded back into the pool to further boost earning.
The BGT emissions themselves can be directed to different pools based on governance.
We only use trusted and audited sources of rehypothecation yield.
Customizable Automatic BGT Farming
Most Berachain native protocols can farm BGT, but Burve has opted to do it natively within the protocol. The reason is because we believe all users are different and we should allow them to customize how aggressively they want to farm BGT. So we allow users to choose exactly what percent of their fee earnings they want to allocate towards boost yields by farming BGT from Berachain validators.
As a result, this also means users don't have to manage their own LP deposit in a Reward Vault to optimally earn BGT.
Single-Sided Deposits & Withdrawals
You can conveniently LP into any subset with just a single token and you can withdraw into just one token as well. Of course, as with all AMMs, you'll be exposed to risk from all other tokens in your LP which is why Burve offers Subset LPing and why choosing your subset is so important (see Multi-Swap).
Fixed-Yield Alternative
Not all liquidity in an LP position will be used evenly. For pegged assets, the range at the ends are most under-used and under-earn. So instead of leaving that liquidity in the pool, we allow users to opt into a fixed-yield program for 1 month, 3 months, 6 months and 1 year where they can earn more.
The liquidity that is still fairly-utilized (the liquidity closest to the peg) will remain actively earning in the multi-pool throughout the period. You can withdraw this actively earning liquidity ahead of the under-earning liquidity's lock-up end-date if you'd like.
Why is there under-used/under-earning liquidity?
Pegged assets typically trade around their peg most of the time, and so the most efficient way to earn is to really concentrate all of your liquidity around the peg. But the downside to this is that its principle value will swing a lot due to IL. Over time this may net out to zero, but at any moment that IL may be more than you'd like. So you can either wait for it to re-peg and withdraw or eat the loss. This is why even though it's technically sub-optimal, lots of people prefer wider ranges (2-10%) on stable pairs to minimize this variance and make it more user-friendly.
If you don't care for this stability, can tolerate more risks, and want higher yields for it you can pursue the Alt-Aggressive Pools.
What are Fixed-Yield AMM LPs?
It's exactly as it sounds. Just like fixed-yield deposits on Pendle, you can lock your liquidity for a fixed amount of time to earn a fixed amount of yield.
First choose your duration 1-month, 3-months, 6-months, or 1-year; then deposit; and finally come back after your specified time to reclaim your position.
You can also auto-roll it so after your time expires, you automatically enroll in the next period. Feel free to disable auto-roll at any time to claim your position at the end of the current period.
Note that because this is an LP position, you will still experience IL, but you won't experience any more or any less than you would with a regular deposit.
Where is this fixed-yield coming from?
A variety of places! But none of them change the risk of your LP position.
For stableswaps, since pegged assets are very unlikely to depeg, those premiums won't be very high, but if we can improve your stable/pegged yields by even a percent without additional principle risk we'd be really happy and hope you are too!
Make it as technical as possible...
Fair LP earnings is a function of volatility which has skew based on the current price of the pegged asset. So we can either capture this skew by charging higher fees as the asset falls off its peg or by selling implied volatility with separate markets for liquidity at different ranges. We will be doing the former in Version 1.1, but for now we're tackling this latter option first (no pun intended).
Therefore we simply sell the concavity of LP exposures on-chain through various structured products to capture more yield for users. In theory this should earn more than the realized volatility route both on a risk-adjusted basis and on a real basis according to the historical premium for long vol.
Key Points
Users can choose a lock-up period to earn fixed yield on part of their LP deposit.
This moves the under-utilized liquidity in your position into a special yield locker from which your liquidity is used to underwrite a variety of products.
That under-writing does not change the risk profile of your LP deposit! IL remains the exact same.
Your most active liquidity is still earning yield in the multi-pool, but now your returns are boosted by an additional fixed yield.
Alt-Aggressive Pools
For users who are willing to tolerate greater variance in their position, they can consider the aggressive pools which effectively use a more aggressive concentrated liqudity position. Note that while this can significantly boost yields, this also means your IL will swing more day-to-day.
This is most suitable for very long term holders who won't be bothered by the day-to-day swings, and don't have urgent liquidity needs and may be forced to withdraw in unfavorable times.
Overall Comparison
Multi-Swap
Subset LP
LP Utility
Rehypothecating
BGT
Single-Sided
Curve
Yes
No
Yes
No
No
No
Uniswap V3
No
No
No
No
No
No
Uniswap V4
No
No
No
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
By freezing your LP position in a variety of ways, other on-chain participants can manipulate the payoff of an LP position to create custom payoffs. See our parent company Itos's explanation . These payoffs include options, insurance, leveraged LPs, perps, and more! And the premiums from all of those products go back to our LPs without introducing them to any additional IL risk.
