Chainlink Keepers automates impermanent loss return on Armadillo
Armadillo, a multi-chain impermanent loss (IL) protection solution powered by the Crypto Volatility Index (CVI) from COTI, will be using Chainlink Keepers on Polygon to automate IL protection payout.
CVI operates a basket of volatility products, including Armadillo’s impermanent loss protection.
The CVI team developed a toolbox of decentralized risk management solutions that are applicable and relevant in today’s highly dynamic crypto markets. Armadillo’s impermanent loss protection is just one recent addition to this toolbox and looks to be one of the most promising solutions for liquidity providers.
CVI + Chainlink Keepers
Chainlink Keepers supports secure and cost-efficient automated payouts to liquidity providers (LPs) for their incurred impermanent loss. As a result, the payout of impermanent loss protection can be made in a fully automated way, without any manual action required from LPs.
In order to help automate payouts and further decentralize Armadillo, a dependable solution was needed. Chainlink Keepers is a decentralized service purpose-built to manage tasks on behalf of smart contracts that “wake” up smart contracts when they need to perform critical on-chain functions.
In this case, Chainlink Keepers monitors Armadillo’s impermanent loss protection platform to check if any protection periods have passed. Whenever a user’s protection period has ended, Chainlink Keepers request the payout on behalf of the user, enabling a seamless user experience.
Crypto Volatility Index (CVI)
Using the Black-Scholes option pricing model, the Crypto Volatility Index (CVI) computes the implied volatility of bitcoin and ethereum option prices and then analyzes how markets anticipate future volatility.
CVI is a full-scale decentralized platform that brings the popular “market fear index” to the crypto market, which is created by computing a decentralized volatility index from cryptocurrency option prices and analyzing the market’s expectation of future volatility.
Armadillo is a protocol that offers:
- Multi-Chain Protection — Protects selected pairs staked across any chain, DEX, or platform.
- Non-Custodial — The liquidity does not have to be moved in order to purchase the protection.
- Customized — Each user sets the pair, amount, and timeframe to protect.
- Decentralized On-Chain Protection — On-chain oracles and smart contracts are used to ensure security and manipulation resistance.
Check out Armadillo’s Whitepaper to learn more about the platform.
“We decided to decentralize the payout function of impermanent loss protection using Chainlink Keepers because it is operated by the same pool of time-tested, provably reliable node operators that currently help secure tens of billions of dollars across DeFi, even during record levels of network congestion and extreme volatility. The proven infrastructure of Chainlink helps ensure that every USDC payout for Armadillo’s impermanent loss protection is executed on time in a trust-minimized manner.”
– The CVI Team
Some unique features of Chainlink Keepers include:
- Decentralized Execution — Chainlink Keepers provide reliable, trust-minimized automation with no single point of failure, mitigating risks around manual processes and centralized servers.
- Increased Efficiency — Projects that use Chainlink Keepers are able to reduce time spent on DevOps, minimize operational overhead, and streamline development workflows.
- Enhanced Security — Tamper-proof, Sybil-resistant Chainlink Keepers sign on-chain transactions themselves, enabling automated smart contract execution without exposing private keys.
- Easy-To-Use — Developers are able to schedule time-based automation jobs in seconds using the Chainlink Keepers Job Scheduler’s no-code UI.
“We’ve been using Chainlink Keepers to help rebase our volatility tokens, so the smart contract automation solution has already saved us a lot of operational costs and development time. With this new integration, Chainlink Keepers help ensure that payouts in our impermanent loss protection feature are executed autonomously, further establishing a high standard of security and decentralization for our platform.”
– Shahaf Bar-Geffen, CEO, COTI