According to Blockworks, Steer Protocol has announced its integration of Smart Pools on Sushi to make liquidity provision more attractive for liquidity providers (LPs). Steer's Smart Pools automate aspects of liquidity management and take some data off-chain to increase efficiency for LPs. This integration comes as Sushi considers an overhaul of its tokenomics and its native SUSHI token experiences a market rally.
LPs put capital in pools that automated market makers (AMMs) like Sushi use to create order depth for DeFi assets. However, providing capital as an LP can be inefficient due to loss-versus-rebalancing (LVR), where an LP faces arbitrage from AMM prices lagging behind centralized venues. Steer is an active liquidity management platform (ALM) that focuses on concentrated liquidity. LPs provide the platform with capital for a certain price range to increase their chances of the funds being used for a trade and earning fees. The ALM moves some data off-chain to deal with LVR.
Derek Barrera, the founder of Steer, explained that from the arbitrage perspective, they can place liquidity, which looks like books that are on a centralized exchange, allowing them to capture that price movement before it might happen on-chain. Since its launch over the summer, Steer has become the ninth-largest liquidity management protocol by total value locked (TVL), according to DeFiLlama.
Sushi's Steer integration follows the protocol's "Head Chef" Jared Grey proposing changes to Sushi's tokenomics, aiming to incentivize LPs to lock their liquidity into the DEX for longer periods. Under Sushi's current tokenomics, an average of over $100 million has been paid out in emissions to LPs for every $300 million in TVL created. The price of Sushi (SUSHI) increased from around $0.55 in mid-October to $1.26 in early November and currently trades at $0.96.
