Artichoke is a protocol on the Arbitrum One blockchain that allows users to distribute liquidity unilaterally and earn exchange fees.
DeFi allows full and unrestricted access to anyone, anywhere. However, this imposes certain structural restrictions. A prime example of this is the prevalence of oversecured loans. Anyone can access loans without any verification or review process (without permission). Therefore, they must be guaranteed in advance.
The absence of central third parties creates opportunities for investors to earn fees, with arguably the most obvious example being the provision of liquidity. Users create LP tokens and act as market makers, earning fees from all trading activities. But one of DeFi’s worst kept secrets is that most liquidity providers lose money.
What is Artichoke?
Artichoke is a liquidity provision protocol on the Arbitrum One blockchain. It aims to increase on-chain capital efficiency by allowing users to provide one-sided liquidity through infrastructure tools that enable one-sided liquidity to be added to any token. Artichoke benefits protocols and investors by reducing the need for token incentives to develop robust liquidity pools and mitigating temporary losses for LPs (Liquidity Providers).
It provides deeper liquidity pools for smaller protocols without having to incentivize and inflate their native tokens, while ensuring the mitigation of impermanent losses for LP providers. Artichoke’s Omnipool model is AMM agnostic and can be placed on top of any standard V3 AMM model, allowing concentration of liquidity through the Omnipool and queue structure.
Why do LPs still provide liquidity?
Uniswap alone has more than $3.3 billion in liquidity, and the decentralized exchanges collectively have a TVL of over $12 billion. A notable trend in recent months is that the total TVL of lending protocols has exceeded that of DEXs.
Hypotheses can be made as to why this behavior persists, and the most obvious suggestions point to human psychology. Crypto investors love yield, and the promise of trading fees is much more appealing than the idea of holding assets. Protocols have similarly encouraged this behavior through early inflationary token incentives. And many investors may still remember the glory days of yield farming in 2020/2021.
Another possible explanation for this activity could be the perceived upward impact of the token being farmed. The LPs in question are discounting the losses suffered by the LP pairs today, believing that the resulting returns will eventually be more valuable. There have been several significant upgrades to the AMM model, most notably Uniswap V3 and the Trader Joe’s Liquidity Ledger model. Still, these concentrated liquidity ranges encourage more PVP, and temporary losses are just as common, if not more common, given tighter price band restrictions. In short, the only profitable way to provide liquidity is to choose a pair with similar behavior (stable).
What is tCHOKE?
tCHOKE is the native cryptocurrency of the Artichoke protocol. This token is a synthetic liquidity counterpart for connections powered primarily by USDC. When a user deposits a single asset, Artichoke matches it with tCHOKE to enable greater exchange efficiency.
tCHOKE is sort of the mathematical glue that brings the entire protocol together. By streamlining the matching process, this enables a higher level of capital efficiency. Instead of each asset having a separate liquidity pair, they are all paired with tCHOKE within the Omnipool model. Although there are more moving parts from a technical standpoint, there are fewer when it comes to the swap process. And fewer parts mean more efficiency. tCHOKE keeps everything liquid and benefits from being backed by the stable asset USDC.
