Original author: Web3CN

Original source: web3 Chinese

 

1. Project Introduction

 

iZUMi Finance is a liquidity optimization protocol built on the Ethereum network. It is a Uniswap V3 ecological project that provides blockchain projects with "programmable liquidity as a service" based on Uniswap V3.

By continuously expanding the multi-chain ecosystem, iZUMi Finance will eventually support cross-chain liquidity trading mechanisms, bring systematic liquidity services to the multi-chain ecosystem, and become a one-stop Liquidity as a Service (LaaS) platform with ultra-high capital efficiency in the DeFi industry.

 

2. Project Vision

 

After Uniswap V3 was launched, its function of providing liquidity within a certain price range has sparked a lot of discussion. The essence of this solution is to provide more options to improve capital efficiency and LP returns, but after actual operation, ordinary users have suffered losses because they cannot make high-frequency adjustments based on market conditions or because the adjustment cost is too high, resulting in liquidity being outside the price fluctuation range for a long time.

iZUMi Finance hopes to solve this problem. On the one hand, users can entrust their funds to its management to maximize their returns; on the other hand, project parties can also use this agreement to improve the stability of project token prices and reduce fluctuations caused by large transactions of a single currency.

In Japanese, iZUMi means "spring". As a multi-chain DeFi protocol, iZUMi Finance believes that each token should obtain better on-chain liquidity in an efficient and lasting way. By creating a one-stop liquidity-as-a-service, it provides each partner with the ultimate on-chain liquidity, like spring water, which is endless and everlasting.

 

3. Features and advantages

 

iZUMi's model solves the problem of liquidity of stablecoins and anchored assets in the Uniswap V3 range and the low return of liquidity providers, and minimizes impermanent losses and improves the efficiency of capital utilization. iZUMi is close to CEX in terms of professionalism, and its core advantages are mainly the following two points:

(1) Discrete liquidity assets are more efficient

iZUMi has upgraded the Uniswap algorithm, combined with the innovative Discretized Liquidity AMM (DL-AMM), and improved the centralized liquidity model first deployed by Uniswap V3. It is the industry's first AMM-based, 100% on-chain DEX that supports LOB transactions.

DL-AMM enables liquidity to be deployed in every price movement and reduces slippage when exchanging tokens. DL-AMM cuts these price ranges into small, narrow segments, making these price ranges close to 0. DL-AMM further improves capital efficiency by providing liquidity in every desired price range. Traders on iZiSwap will benefit from greater capital efficiency, zero slippage, and cheaper transaction fees, with guaranteed liquidity in any price range they want.

(2) Limit orders are allowed

iZiSwap uses the original DL-AMM discrete liquidity AMM model, which allows liquidity to be deployed at each fixed price point. Unlike the custodial limit order service, the custodian is actually a price monitoring program that helps users use Swap (market price function) to trade when the price is triggered, but it cannot judge the success rate of the transaction and the stability of the transaction price.

The user's limit order will be considered to add liquidity at a certain price tick so that the user can trade at a fixed price as a limit order. The limit order feature is free for users and no fees are required.

 

IV. Development History

 

  • 2021.10.08 iZUMi announced the successful completion of its first round of financing of US$600,000

  • 2021.12.09 iZUMi Completes US$3.5 Million Series A Financing

  • 2021.12.20 iZUMi announced that its IZI token will be listed on Bybit

  • 2021.12.21 iZUMi launches Uniswap V3 liquidity mining platform LiquidBox

  • 2021.12.22 DeFi derivatives platform DeSyn Protocol and iZUMi Finance reach technical and business partnership

  • 2022.01.17 iZUMi is deployed on Polygon to support Uniswap V3 liquidity mining

  • 2022.02.18 iZUMi announced the launch of its decentralized autonomous organization (DAO), and adopted a quadratic voting mechanism based on veNFT for governance

  • 2022.03.21 iZUMi launched veiZi, which can be used in three application scenarios: voting, staking, and mining acceleration. At the same time, iZUMi announced its official cooperation with the NFT project HOURAI

  • 2022.03.26 Celer Network’s cross-chain payment network cBridge announces support for iZUMi Finance

  • 2022.03.29 iZUMi launches Arbitrum

  • 2022.05.07 iZiSwap is launched on BNB Chain

  • 2022.05.10 iZUMi becomes part of Arbitrum Odyssey event

  • 2022.05.20 iZUMi announced the completion of US$30 million in Series B financing

  • 2022.07.08 iZUMi has successfully redeemed its two bonds issued on Solv Protocol

  • 2022.07.18 iZUMi launches The Ultra Evolution mining reward event

  • 2022.09.13 NEAR ecosystem DeFi platform Ref Finance cooperates with iZUMi Finance and Arctic to release Ref V2

  • 2022.12.17 iZUMi launches decentralized order book exchange iZiSwap Pro

  • 2023.04.16 iZiSwap Pro lands on zkSync Era mainnet

  • 2023.04.21 iZUMi announced the completion of US$22 million in financing

 

5. Team Background

 

The iZUMi team members are relatively mysterious. Currently, there is only one co-founder, Jimmy Yin, in the official team. Jimmy Yin may be related to YIN Finance, the partner of iZUMi Finance's "Joint Liquidity Mining Plan" announced in early 2022.

Not long ago, Jimmy Yin participated in the Web3 Festival series of events "Infra and Applications Onboarding the Next Billion Users" in Hong Kong and shared the latest development of iZUMi.

In addition, in an AMA held by the MEXC exchange on December 23, 2021, an iZUMi co-founder named Dima Sharenk participated in the event.

 

VI. Financing Information

 

On October 8, 2021, iZUMi Finance received US$600,000 in financing from investors including Tess Ventures, Puzzle Ventures, Everest Ventures Group, LucidBlue Ventures, Youbi Capital, Nothing Research, WolfEdge, Adaptive Lab and ICG.

In November 2021, iZUMi Finance raised US$2.1 million in financing, led by Mirana Ventures, with participation from Everest Ventures Group, Youbi Capital, LucidBlue Ventures, Puzzle Ventures, WolfEdge, ICG, Adaptive Lab, Nothing Research and Tess Ventures.

On December 9, 2021, iZUMi Finance received another $3.5 million in Series A financing, bringing its total financing to $5.6 million. Participants in the Series A financing include Mirana Ventures, IOSG, Cadenza, Fenbushi Capital, EVG, Hashkey, GSR, CyberX, Bixin, Kronos, Dorahacks, Gate Labs, MEXC, and individual investors from Nansen, Perp, Chainlink, and Babel.

On May 20, 2022, iZUMi Finance announced the completion of US$30 million in financing, including from institutional investors such as Ivy Venture, Cobo and Mirana, of which more than US$10 million came from convertible bond financing (Bond Vouchers) in cooperation with Solv Protocol.

On April 21, 2023, iZUMi Finance announced the completion of a new round of financing of US$22 million. This round of fundraising received support from funds and individual investors such as Unicode Digital, NextGen Digital Venture, Bella Protocol, Incuba Alpha, etc., and a total of US$22 million worth of ETH, stETH, USDC, USDT, etc. were raised.

 

VII. Development Achievements

 

（1）VeiZi

veNFT within the iZUMi system is also known as veiZi and was launched on March 21, 2022. When talking about the origin of veNFT, we have to mention veToken, a concept first proposed by Curve. "ve" is the abbreviation of "voter escrowed", which is voter custody. It works by locking CRV tokens and then converting them into veCRV with protocol governance capabilities. Holders of veCRV will enjoy the governance rights of the Curve protocol, the handling fees generated in Curve, and higher returns when mining liquidity. However, veCRV cannot be transferred or traded.

The proposal of veToken aims to bind the long-term interests of protocol participants to the protocol and make decisions that are in line with the long-term interests of themselves and the protocol. The locked tokens will also reduce the pace of token inflation to a certain extent and promote the growth of the token price in the secondary market.

In the DeFi ecosystem, veiZi will be mainly used in three application scenarios: voting, staking, and mining acceleration.

（2）iSwap Pro

iZiSwapPro is an AMM-driven, capital-efficient order book DEX that went live on December 17, 2022, allowing users to trade without slippage.

iZiSwap Pro introduces an order book-style user interface and interactive experience, with unified accounts, no gas fees, low transaction costs, and censorship resistance. More importantly, iZiSwap Pro uses a non-custodial model, and the data is transparent and traceable on the chain.

Compared with other AMM DEXs, iZiSwap Pro has no transaction slippage and is immune to "sandwich attacks". Users can trade their tokens at precise prices through the limit order mode and enjoy the same trading interface and usage experience as order book exchanges.

(3) Community

Twitter followers: 100,000+

Discord: around 65,000

TG：17387

 

8. Economic Model

 

The iZi token is an Ethereum ERC-20 based utility token on the iZUMi platform with a total supply of 2 billion, which is used for incentive pool settings and other tools.

iZi is a utility token on the platform that can be used to pay cross-chain transaction fees, as well as to set up incentive pools and use v3toolbox.

Users can pledge iZi to obtain the governance token veiZi, which cannot be transferred or traded. Its main functions include: initiating proposals and conducting governance votes, obtaining Uniswap V3 liquidity mining rewards, and obtaining part of the ecological benefits.

The functions of veiZi are as follows:

① Voting: DAO governance and Quadratic voting will be used to determine key issues. The iZi emission per cycle will be determined and distributed based on veiZi voting rights. The owner of veiZi can delegate voting rights to another address.

② Staking: 50% of the platform revenue will be used to repurchase iZi and sent to veiZi holders monthly according to voting rights. In the first 4 years, 40 million iZi will be issued as staking rewards to veiZi holders each year.

③ Boost: After staking NFT, veiZi will be used to increase the LiquidBox pool APR to 2.5 times. The boost mechanism takes the smaller of two values ​​to calculate your income weight. The first value is simple, it is the amount of vliquidity calculated by the UniV3 LP NFT that the user stakes on the iZUMi platform.

According to the official website, iZUMi Finance currently has three products: LiquidBox, iZiSwap and iZUMi Bond.

(1) Liquidity Mining - LiquidBox

The iZUMi team first proposed and implemented the liquidity mining solution "LiquidBox" based on Uniswap V3 NFT LP tokens. Unlike the traditional V2 replaceable LP tokens that are directly staked for mining, when designing the liquidity mining incentive solution, the LiquidBox protocol can clearly set the value range of the incentive LP tokens.

After the user stakes the V3 LP token to the iZUMi protocol, iZUMi's LiquidBox will automatically determine whether the value range of the LP token is within the liquidity incentive value range set by the project party. If it is within the range, LiquidBox will issue liquidity mining token rewards to liquidity providers according to the incentive plan.

Project parties can establish trading pairs and liquidity pools based on Uniswap V3, and attract liquidity more effectively through limited range rewards and different rewards in different price ranges.

The liquidity models provided by iZUMi Finance include:

Model 1: “Centralized Liquidity Mining Model”, where stablecoin and anchor asset reward price ranges are fixed

LiquidBox is able to distribute liquidity mining incentive tokens within a specific price range, such as [0.95,1.05], to keep the price of stablecoins or anchored assets stable. Each block in the (0.95p,1.05p) price range receives 10 tokens from stablecoin and pegged asset issuers. izumi evaluates the total effective liquidity in the (0.95p,1.05p) price range and distributes incentives linearly based on the proportion of each LP holding. These incentives attract liquidity into this price range, thereby achieving minimal slippage.

Model 2: “Unilateral Non-Impermanent Loss Mining Model” for Non-Stable Tokens at All Prices

iZUMi LiquidBox allows liquidity mining incentive tokens within the current price range to compensate for the impermanent loss caused by price changes in the corresponding time interval.

Similar to the traditional xy=k model, LP also puts half the value of USDC and half the value of project tokens into the iZUMi LiquidBox to start liquidity mining with one click.

However, in order to avoid the "Pool 2 dilemma" caused by the traditional xy=k model (i.e. LP puts all USDC as potential buy orders and project tokens as potential sell orders into the liquidity pool of the trading pair, causing LP to passively sell their own project tokens when the price rises, suffer impermanent losses, and increase the passive selling pressure of the project party, preventing the price from rising, resulting in a "lose-lose" situation.)

iZUMi LiquidBox innovated the "unilateral non-impermanent loss" model based on Uniswap V3, putting LP's USDC into (Pa, Pc), just below the current price Pc, and putting LP's project tokens into staking mining of into the trading pool (that is, those above Pc are potential sellers), thus forming a "strong buying and selling" model, which is more conducive to price increases.

Model 3: The “Dynamic Range” model incentivizes non-stable tokens to provide dynamic liquidity around the current price

In iZUMi Model Three "Dynamic Range", users participate in liquidity mining by setting liquidity within the value range of (0.25Pc, 4Pc) of the current price (Pc). The width of the price range can also be set by the project team, such as (0.5Pc, 2Pc), which will also provide more concentrated liquidity. After the user provides liquidity to the currency pair at the set price range through the iZUMi platform, the iZUMi smart contract automatically pledges the Uniswap V3 LP NFT to the liquidity mining program, and the liquidity provider automatically participates in mining and begins to receive rewards provided by the liquidity mining iZUMi and the corresponding project.

In addition to this, LPs will also receive transaction fee income from Uniswap V3, because the value range set by the liquidity provider includes the current token price. The combination of these two incomes will significantly increase the expected return of liquidity providers. The income of liquidity providers participating in liquidity mining will be calculated as a percentage of the total liquidity of the program based on the liquidity thickness (v_liquidity) they provide, as shown below:

Based on the above equation, we can conclude that compared with traditional full-range liquidity mining activities, based on the iZUMi model three "dynamic range", if the price range is set to (0.5 Pc, 2Pc), it will provide about three times the capital utilization efficiency. And based on the "dynamic range" model, users do not need to adjust their positions frequently. When participating in liquidity mining, even if there is a unilateral large fluctuation in the coin price, breaking through the extreme situation of the value range (0.25Pc, 4Pc) corresponding to the coin price, the Uniswap V3 LP NFT held by the user will continue to generate liquidity mining income for the user as long as the liquidity mining is not terminated. Of course, liquidity providers can choose to redeem and re-provide liquidity based on the latest price, which ensures that they can continue to receive Uniswap V3 transaction fees in addition to liquidity mining income.

(2) New Liquidity Algorithm Swap - iZiSwap

Originally launched on BNB Chain, iZiSwap is an innovative Discretized Liquidity AMM (DL-AMM) that provides efficient on-chain liquidity for Web3 assets, which can have over 5000 times capital efficiency than traditional xy=k DEX.

The DL-AMM algorithm uses a new discrete centralized liquidity algorithm that has centralized liquidity market-making characteristics similar to Uniswap V3, but enables liquidity to be accurately allocated at any fixed price rather than within a price range. This makes iZiSwap easier to manage in terms of liquidity and supports more trading methods, such as limit orders.

(3) Convertible bonds - iZUMi Bond / iUSD

Bond Farming is the latest paradigm of on-chain financial derivatives innovation proposed by iZUMi Finance based on the team's deep understanding of traditional finance and dedicated research on the DeFi industry. As an on-chain financing bond issued by iZUMi Finance, it combines the model of convertible bonds issued by traditional financial companies with the model of on-chain over-collateralized stablecoins.

Based on the special token tools and over-collateralization mechanism in the DeFi field, iZUMi has created the first convertible bond denominated in US dollars - iUSD (iZUMi Bond USD). Different from the well-known concept of US dollar stablecoins, it abandons the systemic risks of algorithmic stablecoins and uses transparent on-chain funds managed by smart contracts and multi-signature wallets as over-collateral to support the value of iUSD. The convertible bonds issued by iZUMi through Solv Protocol support investors to convert to iZi tokens at a specific price when they expire, so that investors can also enjoy the potential investment returns brought by the appreciation of iZi tokens.

 

IX. Industry Analysis

 

Any centralized entity will have the risk of a single point of evil. The asset transparency, security, and non-custody provided by DEX, combined with its open and composable characteristics, will prove its reliability as centralized institutions continue to rise and fall.

Currently, the leading DEXs are focusing on improving the traffic side, including improving user experience and achieving traffic exposure on mobile and web terminals.

The emergence of centralized liquidity in Uniswap V3 has made liquidity provision more complex and more professional. Recently, a large number of DEXs with centralized liquidity design have appeared in multiple ecosystems. Considering the special environment on the chain (including transaction confirmation delay, MEV, fee mechanism, slippage, etc.), as well as the completely different mathematical calculations and characteristics of the AMM model and the traditional Order Book, it can be foreseen that there will be more market-making teams that focus on providing professional liquidity services in centralized liquidity DEXs in the future, and iZUMi Finance is one of them.

 

10. Opportunities and Risks

 

(1) Opportunities

Uniswap has gradually formed its own ecosystem, and there are many protocols related to Uniswap liquidity management. However, there are not many projects like iZUMi Finance that start from Uniswap V3's interval liquidity management and hope to form a larger ecosystem through cross-chain bridges and multi-chain DEX in the future.

iZUMi Finance has currently launched iZiSwap Pro, which, combined with DL-AMM's compatibility with AMM and limit orders, provides a user-friendly, low-cost trading experience and realizes a decentralized exchange on the chain. There will be a huge market space in the future.

(2) Risks

iZUMi's innovation is an inspiration for the DeFi 2.0 protocol and also a broadening of the application field of NFT. It has attracted a lot of funds in less than 90 days since its launch and has completed multiple rounds of financing, which shows that iZUMi has certain appeal and strength. However, data shows that about 50% of wallets have suffered losses after Uniswap V3 provided liquidity, and the DeFi field is developing rapidly and the competition is fierce. As iZUMi has been online for more than a year, except for the financing news, there is nothing too eye-catching. The project is still in the development stage, and it remains to be seen how it will be in the future.