How Double Works
Last updated
Last updated
Double is an AMM LP-side only DeFi primitive that complements existing AMMs. It acts like a 2-sided marketplace that matches capital on one side with token on the other side, and then inserts the pair as a LP position into selected AMMs.
As shown in the image above, Double has two sides: one side for token holders to deposit and withdraw project tokens, the other side for capital providers to supply or remove capital (e.g. stablecoins, WETH, WBTC).
Different from LPing directly into Uniswap where capital providers need to supply 100% of the pool position on both sides with 50% on each side, with Double, capital providers only need to supply 50% of the pool position on the capital side, Double will match 50% of the pool position on the token side based on the spot price from the AMM. Then Double inserts the LP position into Uniswap and lock the LP tokens inside Double's smart contracts.
The incentive for capital providers to use Double is that capital providers will get 100% of yields earned from the LP position. Since capital providers only supply 50% of the pool position but get the same 100% of the yields, effectively capital providers double their ROI. Token side supply 50% of the pool position but 0% of the yields earned by the position, effectively lend token for free to capital providers.
Like AMMs, Double is permissionless. Any holder of any project token can freely deposit and withdraw tokens into Double on the token side at anytime. Tokens deposited by different holders are pooled together based on token addresses. Similarly, any capital provider either retail or institution can supply and withdraw capital into Double on the capital side at anytime.
Since capital providers risk their valuable capital, they should be in the driver seat to make any decision related to LP positions. In Double's design, capital providers decide which project tokens they like to LP, which AMM to use, how much capital to deploy, when to create or remove an LP position, and which price range to choose when using concentrated liquidity feature.
This design also prevents sybil attacks from token side in a permissionless environment. Otherwise, scam projects could scam capital providers to supply capital and dump scam tokens on them. Basically, just depositing tokens into Double does not mean projects will get liquidity. Only when capital providers decide to supply capital for those projects tokens, projects will get liquidity. Double makes a reasonable assumption that capital providers are sophisticated investors who understand risks and rewards, and will conduct their due diligence on token projects.
