How Concordex Provides Decentralized Fund Management For Institutional DeFi Investors
A DEX designed for institutions should be as easy to use as possible. Unfortunately, the “Concentrated Liquidity Market Maker” (CLMM) model widely adopted by modern DEXes can deter non-professional market makers. Concordex was designed with the primary objective of simplifying DeFi and enhancing its usability. This article sheds light on how the intricacies of DeFi have increased over time and how Concordex employs automated fund managers to streamline the market-making process.
The Evolution of DeFi Complexity: From AMM to CLMM
The original “x*y=k” model was used by DEXes like Uniswap v2. The model was simple enough to allow anyone to become a market maker. However, despite its value as an initial model, the even distribution of liquidity across a broad price range limited its profitability.
DeFi protocols started integrating the CLMM model for efficient liquidity allocation. This permitted LPs to concentrate their liquidity within a specific price bracket, fostering a healthier ROI. However, this was a trade-off as CLMM introduced greater complexity and demanded active management.
The Complexity of CLMMs
The appeal of the “x*y=k” model stemmed from its built-for-purpose passive LPing. On the other hand, CLMM imposes additional responsibilities on LPs, such as,
- Pool selection.
- Specification of price range width.
- Ongoing maintenance of liquidity ranges to keep their offering aligned with the current swap rate.
While adopting the CLMM model was a necessary progression for DeFi, the subsequent complexities have discouraged amateur market makers.
So, what’s the solution?
At Concordex, we believe that decentralized fund management can fix CLMM’s complexity.
Understanding Fund Management
Fund management, also known as investment management, involves the oversight and administration of a pool of financial resources owned by investors, with the ultimate goal being to enhance its value over time. This process involves making strategic decisions about where and how best to invest the money to yield the highest possible returns. The scope of investment fund management can cover various asset classes, such as stocks, bonds, real estate, and commodities, among others. Additionally, it could involve managing retirement savings or pension funds.
A fund manager is an expert tasked with carrying out investment fund management. These professionals oversee investment portfolios, commonly known as funds. Investors can contribute to these funds or withdraw their capital from them. Portfolio managers possess a deep knowledge of financial markets and conduct comprehensive research to identify which assets to purchase or liquidate to maximize the fund’s value.
The duties of a portfolio manager generally include:
- Studying market trends and the economic environment to make informed investment choices.
- Picking appropriate investment options based on the fund’s objectives and the risk tolerance of the investors.
- Keeping track of the investments within the fund and tweaking the portfolio as required.
- Keeping investors informed about the performance of the fund and its investment strategy.
How Concordex’s Integrates Fund Management into DeFi
Introducing a fund manager in DeFi may be counterintuitive, given DeFi’s foundational principle of eliminating middlemen. Concordex leverages smart contracts to deploy an automated liquidity management pool. The liquidity management pool handles essential yet redundant tasks such as:
- Choosing the token pairs for trade submission.
- Select the price ranges for orders.
- Determining the fees for their position.
Concordex’s liquidity management pool substantially eases the process for amateur investors, making DeFi market participation more accessible. Moving forward, the Concordex community will be encouraged to develop intuitive algorithms and heuristics that enhance the pool’s effectiveness. They will be able to monetize their solutions in a secondary marketplace.
A key objective in creating Concordex was to simplify operations for novice investors. Our strategy includes the introduction of a “portfolio management layer,” which we believe will democratize DeFi market making and facilitate easier access for institutional investors.