Zircon Finance launches mainnet to mitigate impermanent loss on Moonriver
Zircon Finance, an automated market maker (AMM) and a decentralized exchange on Moonbeam, announced the launch of a mainnet network to address investors’ challenges related to impermanent loss in decentralized finance (DeFi).
Impermanent loss relates to a condition wherein investors lose assets they had previously dedicated to providing liquidity to a liquidity pool for earning profits via yields. The mainnet network, dubbed Zircon Gamma, aims to counter such losses through single-sided liquidity over the Moonriver network, which tranches or splits risks between a volatile cryptocurrency and a stablecoin.
For example, in the case of an ETH/USDC pool, Zircon allows Ether (ETH) to maintain full exposure while ensuring safety through USD Coin (USDC) stablecoin. In addition, the mainnet allows both sides to earn swap fees.
As explained by Zircon, loat liquidity pools like ETH double their gains over regular pools but remain at the risk of impermanent loss. However, the AMM’s in-house Async LPing mechanism reduces the risk by at least 90%.
The mechanism does this by incentivizing liquidity pools to restock lost ETH funded via the earned fees. Speaking to Cointelegraph, Andrey Shevchenko, co-founder of Zircon, revealed that his inspiration to create such a system stems from the traders' need for a flexible and permissionless solution, stating:
Shevchenko acknowledged the obvious failure conditions in case a token nosedives to $0, but argued that "but Zircon reduces it enough to make impermanent losses a non-issue. What’s more, we can weaponize it for creating options."
When compared to existing players that pitch protection against impermanent loss, Shevchenko stressed the numerous fail-safe mechanisms that help rebalance the
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