PancakeSwap, the leading decentralized exchange in the BNB chain ecosystem, announced a short while ago that it has introduced a new mechanism that leverages capital efficiency within the v3 platform.
This is the “Position Manager,” a feature implemented under the collaboration of partner Bril Finance, which helps LP providers more advantageously manage the cash lent to the protocol.
The benefits to the end user are different-all of which help make PancakeSwap a leader in the DEX domain along with Uniswap and Curve.
Let’s look at all the details below.
Summary
PancakeSwap and the introduction of “Position Manager” on v3: the feature dedicated to capital efficiency
PancakeSwap v3 has launched a ‘very interesting feature called “Position Manager” in collaboration with DeFi solution partner Bril Finance.
This new implementation essentially serves to address one of the main hot topics in the v3 version of the decentralized exchange: capital efficiency.
Although in the latest version of PancakeSwap it is possible to select custom price ranges when acting as a liquidity provider, so as to optimally manage one’s capital in areas of high trading volume, this turns out to be a very complex practice unfamiliar to the inexperienced.
Position Manager aims to carry out this process in an automated way, helping LP providers intelligently manage their crypto funds by simply letting an algorithm manage positions on its own.
All of this, of course, takes place under a trustless process, managed by a smart contract that users can rely on.
Bril Finance, DEX’s partner of choice in the BNB chain ecosystem, conducted an initial test of the algorithm in question demonstrating an internal rate of return in excess of 24%.
Obviously, this yield is the result of a test done over a narrow period of time, in which BTC has contributed to the increase in on-chain exchanges due to its rally in the market, hence this data should be taken with a grain of salt and is not indicative of sure profits in the future.
In any case, this is a very interesting implementation because it puts users in a position to intelligently leverage their capital without having to waste time searching for the most appropriate DeFi strategy and selecting precise price ranges for LPs.
Connor O’Shea, CEO of Brill Finance, commented on the introduction of the Position Manager function as follows:
“This integration puts professional-grade tools into the hands of millions of people and removes the most intensive and time-consuming aspects of asset management.”
Mochi, head chef at PancakeSwap, is also enthusiastic about the new collaboration, and quoted verbatim in a recent interview:
“Bril’s automated technology and its integration with PancakeSwap will allow PancakeSwap users to enjoy the core features and functionalities they are already accustomed to and seamlessly earn on their assets in a hands-off manner.
We aim to become a hub for all of DeFi and integrations such as this, allowing us to become a one-stop shop for portfolio management.”
Currently, the DeFi market is worth $41.94 billion, still a long way from the all-time high of $180 billion in November 2021.
The new feature launched on v3 could push users to record significant profits should we observe a significant increase in activity in the decentralized finance sector in the coming months, in line with expectations of the upcoming bullish market.
How does the new implementation work and what are the benefits for the end user?
Position Manager has been integrated directly into the PancakeSwap user interface and can be used by users right away.
Its operation is similar to “Yield farming” operations where one needs to lock one’s tokens ( usually two tokens although a “single asset” version is available) in order to receive returns on the LP which will also need to be locked in turn.
In detail, in order to use the new implementation announced by PancakeSwap, in collaboration with Bril Finance, it is first necessary to go to the official DEX website and click on the “Position Manager” item.
At the moment this feature is only available on the BNB chain, hence pay attention to the network you are connected with before trying to access the service.
Once in the appropriate section, you will need to choose the liquidity pair you most prefer, select the “add liquidity” item and add the amount of assets you prefer.
The “single token” checkmark tells us that we can provide liquidity with a single token ( and not in pairs), yet still get an LP that is made up of both coins.
This helps liquidity providers access pools more easily without having to adjust the proportioning of tokens that need to be blocked.
Once having chosen the amount of assets to be deposited, there is to approve the smart contract and confirm it in the second location by paying the respective gas fees.
Once this brief process is completed, the assets will be managed in an automated manner by an algorithm that maximizes the rewards related to the trading fees performed with the locked coins in the pool.
Do not rely too heavily on the yield presented as it may vary significantly as the amount of liquidity in those pools varies.
The status of the DeFi market and the number of trades occurring on PancakeSwap also affect the yield in question, hence monitor the data daily if you want to get specific data.
Regarding direct benefits for users who choose to join this option in providing liquidity to the protocol we find:
- automation of the auto-compounding process: all profits from LP activity are automatically reinvested without having to calculate the expense from the gas. The more time that passes from the first transaction, the higher the return should be ( at the same countervalue) considering the power of compound interest
- optimized management without going outside the profitable range: the protocols PancakeSwap relies on optimally manage returns by adjusting with the most profitable price ranges to act as LPs. This also minimizes the risk of asset losses
- seamless integration with the best protocols and strategies: the DEX partners manage some of the best DeFi strategies to optimize their on-chain capital
