Talo, a distributed systems development firm, and Amber Group, a diversified trading firm, today announced the launch of KeeperDAO. KeeperDAO is an on-chain liquidity underwriter for decentralized finance (DeFi) that economically incentivizes pooled participation in ‘keeper’ strategies.
Keepers in DeFi accrue millions of dollars in profit by managing liquidations and rebalances on applications spanning margin trading, lending and exchange on platforms such as MakerDAO, dYdX, SET Protocol, DDEX, and Compound.
The growth of margin-dependent financial applications built on Ethereum requires a large pool of liquidity to scale. KeeperDAO provides this by enabling anyone to pool liquidity to capture opportunities much larger than what could be captured by individuals, thereby lowering the barrier to entry.
“KeeperDAO fills an obvious void in the current DeFi ecosystem. Outside of speculative trading and lending, there have not existed many ways for market participants to natively earn a rate of return exceeding the ‘risk-free’ rate. Through pooled participation in liquidation strategies, this democratizes access to yield-enhancing strategies that so far have been hard for the average trader to access.”
– Taiyang Zhang, founder, and CEO of Talo and Ren (f.k.a Republic Protocol)
KeeperDAO enables users to pool capital into Ethereum smart contracts to collectively profit from on-chain arbitrage and liquidation opportunities. Capital staked in these pools, such as USDC and DAI, is then used to exploit on-chain profit opportunities presented by protocols such as Compound, dYdX, MakerDAO, DDEX, others. These opportunities are not always present and occur often in times of high volatility. To mitigate having a large pool of capital being underutilized, all assets held by the liquidity pool are also constantly loaned out on markets such as Compound and dYdX.
“Any financial application relying on margin or borrowing requires a robust liquidation engine. Unlike in centralized crypto markets where auto-deleveraging and insurance funds are the norm, DeFi liquidations rely on external LPs to step in to liquidate under-collateralized positions to ensure solvency. KeeperDAO is essentially a decentralized insurance fund for DeFi of sorts.”
– Tiantian Kullander, co-founder of Amber Group
DeFi has grown significantly over the last year with over $400 million USD equivalent of Ether locked in smart contracts, facilitating the creation of non-custodial borrow/lend markets, margin trading exchanges and other financial applications on top of Ethereum.
“As DeFi grows in scope and capacity, the ability to earn trust-minimized returns on capital will likely prove compelling to many. In addition to bolstering the liquidity of existing protocols, the launch of this pooled liquidity would also enable more robust, possibly even oracle-free, protocols to be imagined.”
– Su Zhu, co-founder, and CEO at Three Arrows Capital