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ThorChain - Impermanent Loss Protection gets deprecated with the introduction of Savers Vaults

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Behiver
@behiver
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ThorChain DeFi is one of the Liquidity Pools where I participated and my earnings weren't wiped due to Impermanent Loss, but that's too change as the Impermanent Loss Protection gets deprecated with the introduction of Savers Vaults. Up until now, the ILP was used to address the exposure to price shifts which would unbalance the position as Liquidity Provider and ensure for dual-LPs the ability to always buy back their original deposit amount (by covering any negative unbalancing on it). This solved the price anxiety but did not address the operations and mechanics between the assets.

Starting on block 9,450,000 (sometime around 6-Feb-2023), ILP would be deprecated. While this will happen, there are some things that are good to know about.

  • Current existing LPs will have their ILP grandfathered, meaning they will continue to have ILP.
  • New and top-up deposits before that block will have their ILP grandfathered, thus there is still time to create positions and benefit from ILP.
  • Partial withdrawals after that block will NOT affect the ILP as this will hold on from the initial smart contract.
  • Any new deposits AFTER that block will no longer enjoy any ILP, thus will great more risk exposure to unbalanced asset prices.
  • Any top-ups to existing LPs after that block will cancel any ILP that was previously due as it is altering the smart contract criteria.

As you can see all existing dual-LPs, and any new dual-LPs in the next 30 days will be forever grandfathered in with ILP which offers some time to Liquidity Providers to put their house in order (I will surely update my strategy on these). After that, the shift of strategy for some riskier assets with less return would probably be better held in Savers Vaults.

One thing that we should remember is that dual-LPs get twice the yield of Savers, thus making them a more appealing investment, but will add an additional risk of Impermanent Loss after the Protection feature will be deprecated. Some of the Liquidity Pools that proved themselves in the past probably will continue to provide nice returns also after this move, but I think you need to pick and chose what assets are better for LPs and what assets are good for Savers Vaults. I already did some analysis and some assets that are in LPs for a long time, but still need ILP in order to show positive returns, I will move them to the Savers Vaults. For those that are doing well and do not need ILP, I will leave them in the LPs.

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