The decentralized finance (DeFi) market has continued to evolve at a staggering pace over the last couple of years, as is highlighted by the fact that since 2020, the total value locked (TVL) within this space has surged from $4B to its current valuation of approx. $85B — reaching an all time high over $250B last December. This growth, in large part, can be attributed to the rise of decentralized lending/borrowing protocols that have helped eliminate the need for any centralized intermediaries, middlemen much like how banks and other traditional financial institutions utilize.
To elaborate further, this rise has helped carve out a host of opportunities for traders and investors to maximize their profits. Automated Market Makers (AMM) such as Uniswap are leading the way in this regard. Following the launch of the platform’s third iteration (V3), it is now possible for traders to achieve higher capital efficiency while mitigating issues such as impermanent losses. That said, due to things like concentrated liquidity, custom price ranges and reduced-price slippage, it can sometimes be a bit difficult for traders to devise sustainable LP strategies. Not only that, the issues such as high/unpredictable gas fees are also known to play the devil’s advocate in such a scenario.
However, most of these challenges can be mitigated via the use of simulators that allow users to backtest their strategies using mainnet data, thus allowing them to severely lower their risks while providing them with adequate exposure to the market.
Tuner is a gamechanger for DeFi enthusiasts
Tuner is a programmatic Uniswap V3 simulator that allows strategy backtesting on a transaction-to-transaction basis using arbitrary or historical data without the need for the Ethereum Virtual Machine (EVM). Operationally speaking, the tool-kit is designed to run as a standalone unit while being able to retain the exact smart-contract behavior of the intricate design and implementation of Uniswap V3.
Furthemore, Tuner affords traders the ability to ascertain the efficiency levels of their DeFi transactions while making it possible for users to compare their profit-taking strategies with their peers as well analyze the efficiency of their monetary decisions, etc. On a more technical note, it allows users to completely replicate their ‘tick-level calculations’ which basically means that they can run their strategies through the Uniswap V3 implementation logic module instead of just a high-level mathematical model.
Tuner also helps maintain ‘tick-level precision’ in regard to Uniswap V3 prices, fees, and positions which means that the result of one’s backtesting is as close to a real simulation as possible, that too with the lowest margin of deviation possible. Lastly, the toolkit allows users to fast-forward and rewind transactions enabling users to repeat a small portion of their tests with a different set of parameters as well as run continuous regression tests as per one’s needs and strategic requirements.
Lastly, with the DeFi market continuing to grow and evolve at breakneck speeds, the number of DeFi simulators available in the market too have increased substantially. HASH is one such option, allowing for the real-time modeling and simulation of complex systems including Uniswap. HASH’s open-core platform is designed to help allow developers and data scientists to seamlessly facilitate simulations using composable parts, via a browser-based IDE and viewer for simulations. Other options worth checking out include DeFi Lab’s Uniswap V3 Backtest Simulator and Hack MD’s Uniswap V3 Pool Simulator.
What lies ahead for the Uniswap economy?
To construct sustainable LP strategies on Uniswap, traders need to understand that the platform currently features a whole host of pools running on multiple networks such as Ethereum, Optimism, and Arbitrum, thus making it extremely difficult to align and compare so many possibilities simultaneously. However, simulation tool-kits like Tuner allow users to create a new instance using on-chain data for backtesting without actual smart contract deployment. And since the offering is free to use, there are no gas fees to be covered for.
Therefore, as the DeFi market continues to grow, something that is made evident by rising volumes over the last couple of years, it appears as though the use of trading simulators will only continue to grow. Also, with gas fees remaining volatile, it will be difficult for traders to play around with different price ranges and concentrated liquidity. Simulators like Tuner will not only help usher in a new level of functionality to the DeFi sector but also serve as an extension to many capital-efficient models. Thus, it will be interesting to see how the future of this space plays out.
