Extra Revenue Stream for LPs
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LVR occurs when an automated market maker (AMM) adjusts liquidity pool balances in response to market price fluctuations. This adjustment can result in a misalignment between the pool’s asset values and the market’s optimal trading prices. In such scenarios, arbitrageurs extract value by realigning the pool, effectively capturing a portion of the LP’s potential profit. This creates an invisible cost for liquidity providers, reducing their overall returns and discouraging long-term participation.
Kyo Finance tackles LVR by aligning with solver/arbitrageur to internalize and mitigate these inefficiencies. Kyo captures the value typically extracted away by arbitrageurs and redistributes it back to LPs. This innovative approach ensures that LPs benefit directly from their liquidity contributions, transforming what was once a hidden cost into an additional revenue stream.
