IOTA EVM Buildsphere AMA #12 – WAGMI

Published 23 August, 2024

In this AMA of IOTA Foundation which took place on July 24, 2024, Jonathan hosted whereto from WAGMI to discuss decentralized exchange strategies, automated liquidity management, and more! Read our notes below to learn more.

Background

Jonathan Hellweg (Host) – Community Manager at IOTA

whereto (Guest) – Contributor at WAGMI

WAGMI – a limited TVL decentralized exchange with advanced liquidity provision strategies, GMI mechanics, and leverage

IOTA – an open-source, scalable, feeless, green & permissionless distributed ledger

Understanding AMMs and Order Book Exchanges with WAGMI

Jonathan introduces the BuildSphere format, explaining that it showcases projects populating IOTA EVM and allows the community to ask questions.
whereto introduces himself as a team member at WAGMI, saying he’s been in crypto since early 2019, mostly in the DeFi space. He mentions working with liquidity-based and cross-chain protocols, contributing to WAGMI from a strategy perspective.
Jonathan asks whereto to explain the difference between an order book exchange and an Automated Market Maker (AMM).
whereto explains that the core difference is in liquidity provision. He says order books rely on buyers and sellers, making liquidity volatile, while AMMs have constant liquidity provided by users as liquidity providers.
whereto describes different AMM models:
- Uniswap V1 and V2: All liquidity is used across the full range of the pool, with fees shared among all liquidity providers.
- Uniswap V3: Allows for concentrated liquidity in specific price ranges, potentially earning more fees but requiring more active management.
whereto mentions that WAGMI was built to simplify this process for users.
Jonathan suggests that Uniswap V2 models are easier to understand for beginners, while V3 is more advanced.
whereto agrees but notes that Uni V3 can be more efficient for earning fees if used properly, as liquidity is concentrated in actively traded price ranges rather than spread across the entire pool.

Understanding Risks, Benefits, and Strategies for Retail Liquidity Providers on WAGMI

Jonathan asks whereto to discuss the risks and benefits for retail users providing liquidity.
whereto explains the core risk is impermanent loss, using Ethereum as an example. He mentions that if $ETH’s price changes significantly, liquidity providers could end up with all their $ETH converted to the paired token.
whereto notes that many protocols, including WAGMI, are trying to build strategies to mitigate impermanent loss for end users.
whereto highlights the potential for high yields, mentioning that during volatile markets, APRs can reach triple digits (140-180%) on WAGMI.
Jonathan asks about the difference between Uni V3 pools and strategies on WAGMI’s liquidity tab.
whereto explains that WAGMI is an automated strategy management protocol built on UniswapV3. Users can either manage their own liquidity in V3 pools or join WAGMI’s strategies for automated management.
whereto describes how WAGMI’s strategies work, automatically adjusting and concentrating liquidity within specific price ranges to maximize efficiency and earnings.
Jonathan summarizes that the strategy tab is for users who want to trust WAGMI with managing their position, which whereto confirms.
Jonathan asks about the leveraged liquidity option on WAGMI.
whereto explains WAGMI’s unique leveraging model, which allows traders to open long or short positions without price-based liquidations. Instead, traders pay a daily borrowing rate that increases with utilization.
whereto highlights that this model focuses on yield generation for liquidity providers rather than liquidations.
Jonathan asks about WAGMI’s plans for token rewards for liquidity providers on IOTA.
whereto states that WAGMI doesn’t plan to follow emissions-based rewards, believing that liquidity should be organic and sticky to the chain. He explains that emissions-based models can lead to liquidity leaving when rewards decrease.
whereto highlights WAGMI’s focus on performance-based APRs and delivering real yield, which they believe is more sustainable and beneficial for both users and the chain in the long term.

Exploring WAGMI Token’s Role and Future in DeFi and IOTA EVM

Jonathan acknowledges whereto’s point about mercenary capital in DeFi projects, mentioning the issue of liquidity leaving when incentives diminish.
whereto explains the $WAGMI token and its utility. It’s used for governance staking, and fees generated from strategies are used to buy back $WAGMI and distribute to stakers. Stakers can stake $WAGMI for $sWAGMI and enjoy protocol fees. Token holders can vote on governance proposals and suggest strategies.
Jonathan asks about typical governance decisions made by $WAGMI token holders. whereto mentions recent votes were about launching on specific chains, implementing strategies, readjusting existing strategies, evolving new markets, and adding new pairs to leverage pools.
Jonathan asks about WAGMI’s next steps, both generally and specifically for IOTA EVM. whereto outlines plans for IOTA EVM, including collaborating with friendly protocols to build strategies on top of WAGMI, developing leverage farming, and aiming to deliver high yields to attract more capital to IOTA EVM.
whereto mentions WAGMI’s general plans, which include expanding to other networks and chains, growing strategies and liquidity, and evolving their leverage trading approach.
Jonathan asks where people can learn more about WAGMI. whereto directs people to WAGMI’s community on Discord, the WAGMI website, and their Gitbook and Medium articles.

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Show Information

Medium: YouTube (Video)

Show: IOTA Foundation

Show Title: Buildsphere AMA Ep #12: WAGMI

Show Date: July 24, 2024