Public Pools
AMMs revolutionized decentralized trading by allowing many liquidity providers, or LPs, to come together and pool their assets in smart contract liquidity pools. These pooled tokens could then be priced according to a curve, and made available for traders to swap against.
Hashflow takes this one step further with the introduction of Public Pools. Hashflow public pools enable LPs to contribute assets to a liquidity pool (just like in AMMs), but leverage professional market makers rather than curves to price assets.
By allowing market makers to use their off-chain pricing strategies, LPs benefit from:
  • Smarter pricing strategies that bake-in real world information
  • No impermanent loss
  • Flexibility in tokens they can contribute

How does it work?

Hashflow Public Pools allow liquidity providers (LPs) to earn highly-competitive yields by simply depositing liquidity and leveraging professional market makers’ advanced pricing algorithms.
Unlike AMM liquidity pools which are equity-based, Hashflow public pools are debt-based. What this means is, instead of getting LP shares when you contribute assets to a Hashflow pool, you instead get loan shares, represented as hTokens.
This is because LP contributions are modeled as loans to the market maker pricing the assets. By lending assets to market makers, LPs can capitalize market makers’ efforts and benefit from the profits they generate using their custom pricing algorithms.
Let's take an example where an LP contributes 100 DAI to a public pool. When the LP deposits that 100 DAI, the Hashflow smart contract will look at the exchange rate of hDAI to DAI (usually less than 1), and mint them the equivalent hDAI. With a hypothetical exchange rate of .02, the LP will receive 4000 hDAI which are the loan shares that track their deposits.
In the future, when the LP wishes to withdraw their DAI, Hashflow smart contracts will accept their hDAI, burn it, and return DAI back equivalent to the exchange rate. If the market maker has made any profits on the DAI, the exchange rate will be higher, allowing the LP to withdraw more than 100 DAI.
One thing to note is that since public pools issue loan shares, LPs will get their principal back under normal operations. In this example, this LP will receive at the minimum 100 DAI.
Hashflow public pools currently operate on a proof-of-reputation model, where only market makers with a proven record are currently allowed to operate these pools. Our goal is to move away from the proof-of-reputation model to one where public pools are evaluated and ranked via governance.
Over time, market makers will develop reputations on-chain based on their performance, and Hashflow governance stakeholders will be able to assign them scores by which LPs can make educated decisions.
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