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Capital Efficiency Issues

Capital efficiency isn't a concept released just recently. As a liquidity provider (LP), you have always tried to increase your capital efficiency. This relies on the ability to earn higher returns with the same amount of money, thanks to smarter liquidity allocation. For traders, this relies on which DEX has the lower slippage and the deepest liquidity.

Regarding this, many DEX and Lending protocols have tried to solve these issues for a long time. Curve has been a pioneer in increasing capital efficiency by leveraging vault/lending markets to generate yield on their pools. Balancer in 2021, as well, with the integration of an Asset Manager for idle tokens to earn yield on lending protocols. And more recently, Fluid DEX with their vault, where you can use smart and bad debt to earn additional fees on your lending positions and increase/reduce your supply/borrow rates.

Now, think bigger. Even if these protocol liquidity inefficiencies are partially solved, the issue persists. Count how many protocols we have in the DeFi and blockchain space on EVM (almost 4200), and now think about how many positions with yields this implies.

Here, we have the second level of capital inefficiency, which relates to your personal portfolio and the various DeFi protocols you utilize. Idle tokens are not only found in the positions of DEX/lending protocols. They also pertain to where you're placing your liquidity. Because each week, each day, new opportunities arise, TVL changes, APY adjusts accordingly, and incentives as well.

It's basically impossible to follow these liquidity inefficiencies as they are based on so much parameters. That's why we're creating ZyFAI.

Why use the ZyFAI smart account?

ZyFAI Smart Accounts are personalised smart contract accounts (Safe7579) created on behalf of users to manage the funds they allocate to their ZyFAI Agent. Users have full control over the assets and usage of this deployed wallet.

As mentioned in the previous section, it's challenging for DeFi users to secure efficient yields due to the constantly evolving market, daily changes in TVL, and fluctuating APYs. This agent is designed to manage market movements through rebalancing and auto-compounding, ensuring optimal capital efficiency.

How did we create an Agent you can trust?

To enable an Agent to perform transactions from your wallet accurately and in line with your intentions, ZyFAI has developed three core elements designed to ensure transparency and trust by design. 1. Autided and Known Acccount Abstraction infrastructure: ZyFAI sponsors the deployment of Safe7579 wallets from Rhinestone that they fully own which have gone through multiple audits. These modular smart wallets are multichain-compatible, allowing the same address and configuration across chains via deterministic deployment, with support for modules like session keys and automation tools to enhance flexibility and security. After having deposited USDC on your smart acccount all transactions remain gasless and sponsored with the support of Pimlico's (co-authors of ERC-4337) paymaster infrastructure which is also audited multiple times. 2. Session keys for specific policies for your agent: When setting up your Agent, you’ll begin by selecting a strategy and the underlying protocols it will interact with. You’ll then sign session keys, which grant the Agent permission to execute actions within those protocols. During the bootstrapping phase, these session keys provide the Agent with broad access rights, allowing full configuration through the customization page on ZyFAI’s dashboard. 3. An Agent for allocating and rebalancing your assets: After months of research on LLMs and agent-based systems applied to numerical datasets, we decided to adopt a rule-based implementation to reallocate users’ funds based on multiple rebalancing checks. These checks are executed through an off-chain infra that aggregates various data points about the underlying pools and creates sustainable rules to deliver the most secure and optimal returns for ZyFAI users. The ultimate goal (currently in development) is to verify these rebalancing rules on-chain through a zero-knowledge proof system based on the ERC-8004 implementation standard.