Liquidity aggregator, Elixir, valued at $800 million, how did it become the savior of DeFi?

Written by: TechFlow

This round of bull market is indeed a little different. It is no longer the past grand occasion of "inexhaustible funds in the market, and sector rotation is commonplace". The market is no longer working together, and the only consensus seems to be "no one will take over each other's orders". The liquidity of the crypto market, which has survived the long bear market, has been dry. After waiting for the bull market, it was unexpected that what was welcomed was not a flood of money, but a more serious diversion of liquidity.

As an inevitable part of the crypto market, the DeFi field is naturally unable to escape this round of liquidity curse:

The liquidity of each protocol is dispersed , and decentralized exchanges are unable to provide users with the most comprehensive trading experience due to lack of liquidity.

In the face of the current liquidity dilemma facing DeFi, the decentralized market maker protocol Elixir has something to say.

Elixir aims to improve the liquidity dilemma in the DeFi field through a decentralized approach, integrate liquidity by integrating DeFi protocols, and provide users with an efficient, secure and transparent trading environment.

Currently, Elixir has cooperated with more than 30 DeFi protocols and will launch the mainnet in the second half of the year, while also launching the decentralized US dollar deUSD.

This article will explore Elixir in detail to help readers understand how Elixir has worked with multiple DeFi protocols to solve existing liquidity problems through innovative mechanisms and technologies, as well as the mechanism, advantages and future of Elixir's decentralized dollar deUSD.

DeFi fragmentation, not only yourself suffers

As the hub of value exchange in the DeFi world, the market demand for decentralized exchanges is growing. From the initial "simple and crude as long as it works" to the current "speed and product experience are indispensable", decentralized exchanges have gradually begun to "involve" in order to retain old customers and attract new customers.

As one of the solutions, the decentralized order book provides users with a smooth and low-slippage trading experience with its excellent liquidity supply architecture. As more and more attention is paid to the on-chain trading experience, the position of decentralized order book exchanges in the market is becoming increasingly important.

However, as market attention is dispersed, various DeFi projects are fighting each other. In this situation of a hundred schools of thought, the valuable liquidity in the market has to be divided and divided again. It seems that simply asking market makers to provide liquidity can no longer meet the demand for large-scale and smooth transactions with low slippage, and it is not easy to effectively integrate the divided liquidity.

Similarly, for a large number of native DeFi users, using decentralized exchanges is not just for trading, but the extra income beyond value exchange is the essence of DeFi. Although the order book is good, the income from providing liquidity is taken away by invited market makers . Many users can only worry as they see the market of decentralized order book exchanges getting bigger and bigger, but they can’t really get a piece of the pie.

Elixir saw the naturally matching two-end demand of "the protocol needs to raise money, and users need more profit growth points", and found its own position - directing user funds to various DeFi protocols.

Elixir, the epitome of on-chain liquidity

How did Elixir, sensing market demand, do it?

As a modular DPoS network, Elixir relies on a unique network architecture and liquidity management algorithm to open the invisible door between on-chain users and Dex. It allows users to directly provide liquidity for multiple order book Dexes, while giving on-chain users new capital profit growth points, allowing every on-chain user to experience the feeling of being a market maker, and achieving a win-win situation for the protocol and users.

Elixir has good original intentions and ideas, and its actual performance is indeed impressive. Since its launch, Elixir has always maintained a high level of development and has demonstrated impressive data performance in all dimensions.

Since the launch of the Elixir Protocol, nearly $200 million has been deposited into the protocol, and a total of over 261 million transactions have been processed.

Team Background and Financing

With a keen sense of smell and excellent execution capabilities, the birth of Elixir, which is full of fantastic ideas, is inseparable from the joint efforts of an elite team:

Founder Philip Forte

He was a partner at BlockVenture and is also a consultant for Solana, Moonbeam, Flow Network, and Magic.

Cole Petersen, Partner

DeFi author for Forbes, investor in 3AC, Neuralink, and 20 other startups.

Chris Gilbert, CTO

Former chief engineer at Tokensoft and IDEXX.

COO: Tim Wang

Tim Wang has led Hudson River Trading's crypto venture capital. He has more than 10 years of experience in traditional finance, including investment banking at JP Morgan, private equity at Lightyear Capital, and venture capital at Eniac Ventures. He has angel invested in more than 30 crypto projects.

At the same time, Elixir’s potential to improve the DeFi field has also been recognized by the primary market:

In March 2024, Elixir announced that it had received US$8 million in financing led by Maelstrom Capital and Mysten Labs, with participation from institutions and individuals such as GSR and AmberGroup. Together with the previous two rounds of disclosed financing, the total financing amount reached US$17.6 million.

Elixir's strong partnership landscape

Currently, Elixir has cooperated with more than 30 leading DEXs such as Vertex, RabbitX, Bluefin, Apex, Orderly, etc. Through Elixir, users can provide liquidity to order book DEX trading pairs. Through Elixir LP incentives or LP incentive plans provided by the cooperation agreement, LP providers can obtain diversified staking income.

In the future, Elixir will also be integrated with a series of well-known DeFi protocols such as Pancakeswap, Paradex, and Synfutures. Elixir's ecological map continues to expand, and the future is worth looking forward to.

The number of partners does not affect the quality of Elixir’s liquidity provision.

Through its excellent liquidity integration and ecological collaboration capabilities, Elixir has provided more than $1.25 billion in funding capacity to various order book exchanges to date, and even provided close to or even more than 50% of the liquidity for popular decentralized order book exchanges such as Bluefin, Rabbitx, Orderly Network, and Vertex.

Elixir’s performance so far also proves that its vision of improving DeFi liquidity is not just talk. Such impressive data is inseparable from the support of Eliixir’s unique technical architecture.

Liquidity management is easy, Elixir's remarkable technical advantages

Efficient liquidity integration is inseparable from Elixir's unique and complex network architecture . Elixir's network architecture is divided into two systems: off-chain and on-chain .

• Off-Chain

First, the exchange data source is responsible for obtaining market data from various exchanges. These data sources hold read-only credentials of the exchange and subscribe to an update stream to obtain market data from the exchange in real time. This data will be broadcast to the data aggregator .

The data aggregator collects data from multiple exchange data sources and combines the data into a deterministic data framework. The data aggregator then encrypts and signs the data to ensure the integrity and immutability of the data. Finally, the data aggregator broadcasts the signed data to the verifier and audit node.

The validator network operates through a Delegated Proof of Stake (DPoS) mechanism. Validators are responsible for verifying the correctness of data, and a 66% consensus is required to confirm the validity of the data. End users delegate their status to validators, and validators with the most stake will receive the largest share of rewards and participate in consensus. The validator network ensures the decentralization and security of the system.

The relay infrastructure uses secure enclave technology (and in the long term will use multi-party computing (MPC) infrastructure) to handle keys with exchanges. The relay node checks whether the encrypted order proposal has obtained a 2/3 consensus, then signs these orders with the key and sends the signed orders to the exchange. The relay infrastructure is a bridge between the off-chain system and the on-chain system, ensuring that all transactions are verified and signed.

• On-Chain

Audit nodes receive data frames and order proposals from data aggregators and relay nodes. Audit nodes execute policies to verify whether order proposals are correct. If an order proposal is found to be malicious, the audit node will call the on-chain function in the controller to handle it accordingly. Audit nodes ensure the correctness of data and transactions.

The controller is a smart contract that manages stake, rewards, and penalties. In the event of a dispute, the controller checks the 2/3 consensus of the active validator set and punishes malicious validators. The controller executes on-chain operations through smart contracts to ensure the fairness and security of the system.

The Elixir network architecture ensures efficient data processing and secure transaction verification through the close integration of off-chain and on-chain systems. The validator network achieves decentralization and consensus through the DPoS mechanism, the relay infrastructure ensures the integrity and immutability of data and transactions, and the audit nodes and controllers provide additional security and fair execution. Through this multi-level architectural design, Elixir is able to provide efficient, secure and reliable services in a decentralized environment.

Figure: Elixir network architecture workflow

At the same time, Elixir uses advanced algorithmic market making technology to manage and optimize liquidity supply. The main strategy includes a variant of the infinite Avellaneda-Stoikov algorithm , which determines the quote time by random walk, which creates an almost CEX-like experience for traders and the best LP experience for liquidity providers.

At the same time, in order to prevent market manipulation and gamification, Elixir introduces a random component into its algorithm and uses the SGX secure enclave to generate random numbers. These random numbers are synchronized between validators through a verifiable random function.

Through a unique network architecture and algorithmic liquidity management, Elixir provides an innovative liquidity provision model that ensures both efficiency and security of capital flow while acting as a bridge between different DeFi projects to enhance interoperability and liquidity.

Elixir plans to launch the collateralized synthetic asset decentralized USD deUSD in the near future, aiming to further improve the liquidity status of its partners while increasing the returns of liquidity contributors.

Price stability and diversified returns, synthetic asset deUSD is worth your attention

As DeFi becomes an important hub for on-chain prosperity, the importance of synthetic assets has gradually become prominent. In the on-chain world, synthetic assets directly anchor the value of other assets, saving users many complicated intermediate steps in their transactions, while saving the fees and wear and tear generated by asset exchanges. As a good use case for crypto users to avoid wear and tear, synthetic assets have been deeply rooted in the crypto world, with a continuously growing market value, becoming a crypto ecosystem widely recognized by the market. Various on-chain protocols are also important for incorporating synthetic assets as a source of liquidity.

Synthetic dollar assets can better unify the management of liquidity and coordinate the problem of insufficient interaction between protocols. Although your DeFi protocols are different, synthetic dollars, as a cryptographic token anchored 1:1 to the value of the US dollar, can be used everywhere.

Elixir sees the potential of synthetic assets for DeFi liquidity management and is about to launch a fully collateralized synthetic dollar deUSD.

DeUSD’s price stabilization mechanism is not subject to market fluctuations

Currently, deUSD is collateralized by stETH, and will support more diverse collateral assets in the future. The highlight of the deUSD design mechanism is the use of Delta neutral strategy and dynamic adjustment of asset composition to cope with the risk of collateral asset price fluctuations.

How does the Delta Neutral Strategy work?

First of all, anyone can mint deUSD by pledging stETH. Each pledged stETH will be used to short an equal amount of ETH in the market. At the same time, the short position can also capture the positive market rate, bringing additional income to deUSD.

When the funding rate is negative, deUSD will dynamically adjust its asset composition ratio based on the balance of OCF (Open Collateral Fund, used to support the value of deUSD) to maintain price stability.

The details are as follows:

In a negative rate environment, market borrowing activities increase and OCF balances gradually decrease.

As OCF gradually decreases, the asset composition ratio of deUSD will also be gradually adjusted, reducing the proportion of long-term basic income and increasing the proportion of sDAI/other stable income assets.

For example, when OCF reaches the 100% high water mark, the asset composition ratio of deUSD is "80% long-term strategy portfolio + 20% sDAI/other stable income assets".

When OCF reaches the 75% high water mark, the asset composition of deUSD is dynamically adjusted to "70% long-term strategy portfolio + 30% sDAI/other stable income assets".

It can be seen that, unlike the well-known "stablecoins", deUSD was born with a unique stabilization mechanism, in order to provide users and partners in the ecosystem with a better ecological experience. Users feel more secure while adding liquidity, and protocols that cooperate with Elixir have less worries when enjoying liquidity. No matter what the market price is, the price-stable liquidity is always there and operates stably.

Elixir protocol supports deUSD, making it truly decentralized

A strong validator network is the core of the Elixir protocol. The Elixir validator network consists of 13,000+ independent nodes distributed around the world, each of which participates in transaction verification and consensus mechanisms. The decentralized validator network has no single control point, ensuring that the protocol is free from any centralized form of intervention and control, and ensuring the transparency and security of the protocol.

With the support of the Elixir validator network, users only need to interact with the smart contract to complete the minting/redemption of deUSD, without any centralized approval process. The user's minting rights are completely in their own hands , ensuring full decentralization.

As the core product of the future Elixir protocol, every deUSD transaction is strongly supported by the Elixir validator network, making it a truly decentralized and stable digital asset.

Figure: Current number of Elixir global verification nodes

In addition to the powerful validator network, the Elixir protocol also leaves plenty of room for imagination for its core asset deUSD. The highly interoperable protocol allows deUSD to circulate freely between protocol applications on different chains, giving deUSD a broad range of applications and excellent value capture capabilities. The high scalability of the protocol also allows deUSD to iterate with the continuous upgrading of user and market demand, ensuring the long-term and stable operation of deUSD.

Positive flywheel, Elixir can’t stop with deUSD

• Provide users with easy and diverse income options

Combined with Elixir's powerful resource integration, deUSD abstracts products and exchanges of different public chains into a single income asset, reducing the complexity of operations between different blockchains and exchanges for deUSD holders, making it easier to manage assets and converting more institutions and individuals into potential liquidity providers . deUSD is like a pass in the Elixir cooperative ecosystem. You only need to use deUSD to participate in staking interactions on multiple platforms or even multiple chains, that is, to achieve multi-chain needs through Elixir.

• Protocols are more willing to accept price-stable collateral

Compared with volatile assets such as ETH, deUSD with a price stabilization mechanism may be more popular among decentralized exchanges. After all, this "stability" is not only a manifestation of responsibility to the platform itself, but also to its users. Many partners have accepted deUSD as collateral, and in the future deUSD will also become the main asset for the liquidity of order book decentralized exchanges within the ecosystem.

In addition, the long-term plan of the Elixir Protocol is to expand this staking mechanism to centralized exchanges that accept deUSD as collateral, allowing users to not only utilize deUSD in decentralized exchanges, but also use deUSD for trading and lending operations in certain centralized exchanges, thereby obtaining more benefits and opportunities.

deUSD brings new use cases to Elixir, not only providing users with stable and diverse revenue channels, but also greatly improving the overall liquidity and market competitiveness of the Elixir protocol and its partners.

The Elixir ecosystem has broad prospects. How can we participate now?

Elixir perfectly aggregates a large amount of liquidity and plans synthetic USD assets. It seems that Elixir is fully prepared for the new future of DeFi. So as an on-chain user, how should you participate in the future of Elixir?

Apothecary

In March this year, Elixir launched the Apothecary event, which encourages users to contribute to the Elixir liquidity network by issuing points rewards (elixir of immortality) to users. With the mainnet launch imminent, it is not too late to participate in staking now.

Users can participate in Apothecary by completing personal information, providing liquidity , etc. For details, please see the Apothecary introduction page

Personal information completion:

• Go to the Apothecary participation page

• Connect wallet

• Connect your social media accounts and be rewarded with welcome points when you’re done

Providing liquidity:

• Go to Elixir's liquidity page

https://agg.elixir.xyz

• Connect wallet

• Click on a currency pair and provide liquidity

deUSD staking rewards(to be launched in the future)

When the mainnet is officially launched, users can freely choose to withdraw the ETH staked in the protocol or directly mint the staked ETH into deUSD. The unwithdrawn ETH in the contract will be automatically minted into deUSD of equal value.

Elixir also allocates generous staking rewards for deUSD, increasing Apothecary's point rewards from 20 million to 50 million. Among them, deUSD pledgers will receive 3 times the point rewards, and users who provide liquidity for deUSD/USDC on Curve will receive 5 times the point rewards.

When deUSD is officially launched, the 8-week deUSD Farming will also be launched, which will bring rich staking rewards to deUSD pledgers in a short period of time.

New partners?

As early as April, in a tweet , Elixir released an intriguing preview image, in which Pendle's logo vaguely appeared. Importantly, before this, Elixir officials had "clearly hinted" at upcoming partners in the same way many times.

It seems that the integration of Elixir and Pendle is a foregone conclusion. Combined with the upcoming launch of deUSD, it is reasonable to speculate that Pendle will accept deUSD as a collateral asset. At that time, the TVL performance of deUSD will be worth looking forward to.

Similarly, Elixir recently released a mosaic version of the dYdX logo in its latest tweet . Combined with the upcoming launch of the Elixir mainnet, it seems that Elixir will also be integrated with dYdX. With the addition of dYdX, it can be foreseen that Elixir's cooperation map will continue to expand, connecting more high-quality projects to expand the future of DeFi.

Conclusion

In this atypical bull market, due to limited market liquidity and distracted attention, there seems to be no decent "sector rotation" market. The once colorful tokens also continue to remain silent with their own visions.

Although there is no significant sector effect to drive the price of coins, on-chain finance has never stopped after DeFi Summer. It’s just that DeFi no longer maintains the center of the universe in the last bull market. After the test of time and the market, DeFi has gradually settled from a golden shovel that everyone is scrambling to experience interaction to a source of income that many on-chain players and even whales cannot give up.

As an important DeFi basic component, Elixir, which has witnessed the glory and difficulties of DeFi, has the potential to revive DeFi in the foreseeable future and constantly refresh the market's expectations for DeFi.

At the same time, the introduction of deUSD will also bring more liquidity, users, and open interest into exchanges and DeFi protocols that cooperate with Elixir, ultimately making DeFi "Great Again."

In the crypto world where dangers and opportunities coexist, it is never too late to innovate and improve.

learn more:

Elixir official website: https://www.elixir.xyz/

Elixir official Twitter: https://x.com/elixir

Elixir Telegram Official Group:

https://t.me/elixir_network

Elixir official documentation: https://docs.elixir.xyz/

Apothecary Activities:

https://www.elixir.xyz/apothecary

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