Auto-Rolling Liquidity Coming to Sense
Liquidity providers (LPs) want to allocate capital to a position that is passive and offers attractive upside. Historically, being an LP for on-chain fixed income based on yield stripping has offered neither of those things. It has always (1) offered an unattractive return profile versus just keeping the provided assets yourself, and (2) required active management in migrating liquidity away from matured series. We’ve already published this analysis on how the Sense Space AMM solves the first problem.
Today, we’re announcing our solution to the second problem: Sense will also make it possible for LPs to have a true “set it and forget” passive liquidity position.
But first, what has historically prevented these LP positions from being truly passive?
One of the tricky things about having fixed income tokens with set maturities is, well, they mature. This is why being an LP for on-chain fixed income has never actually been a passive investment. If you’re trying to provide liquidity for a monthly fixed income token, then at the end of every month (when that fixed income token matures) you have to move your liquidity into the new 1-month token.
That is, frankly, annoying (and has tax consequences).
How Sense Fixes This: The Auto-Roller
Sense’s solution for this is technically tricky but logically simple: auto-rolling LP positions.
An auto-rolling LP position automagically migrates liquidity from old, matured series, to freshly initialized series without requiring interaction from its holders. Users have the ability to deposit or withdraw their assets at any time, sometimes without slippage or exposure to the prevailing market interest rate. This is a true “set it and forget it” passive LP position.
Let’s go through an example, where you provide liquidity to an auto-rolling 1-month duration pool. When the series matures, you’ll have a “cool down” period to exit your liquidity without incurring slippage or being exposed to the current market rate. Once the “cool down” period concludes, the auto-rolling position will initialize a new 1-month series automatically, set a starting interest rate, and roll your liquidity into a new pool for that new series.
This means you can put liquidity into Sense, and the protocol will continue using that liquidity without you having to manage it at all! You can add liquidity to Sense, and even if you don’t touch it for years it will continue being used to earn you trading fees. All you have to do to have this automatic management enabled is toggle on “automatically roll position” when adding your liquidity.
This feature is currently in audit, but we expect it to be live later this summer (to make sure you don’t miss it going live, join our discord)!
Why, Though?
Sense’s infrastructure is designed to be self-sustaining and permissionless. In order for this to be true, participating in the market created by that infrastructure has to deliver value to each of the parties that interact with it. For LPs, this means that they have to get attractive, passive returns. The Sense Auto-Roller makes this possible and takes us closer to a future of permissionless fixed rates & expressive yield curves.
As with everything we build here at Sense, this is another step toward replacing the existing fixed income system with decentralized infrastructure that makes it more transparent, more fair, and more resilient.
If you’re excited about this vision and want to help build the future of finance, join us! We’re actively hiring and are always on the lookout for top talent. Join our community on Discord to get involved, and follow us on Twitter for updates!
