To start off, let's address the elephant in the room. Wen Beta Launch? Take a look at our updated roadmap for the answer, as well as what to expect from us throughout 2023.
Now for a deeper dive into what the team has been working on, ahead of the Beta Launch.
Over the last few months, Nova has been conducting a range of auditing and testing processes on our non-custodial asset management protocol. These tests have been really valuable to understand where we can improve our product and provide a secure and reliable user experience.
Firstly, we can’t launch a ground breaking DeFi protocol without taking security seriously. The safety of our users is an absolute priority for us. The Nova protocol recently underwent its first security audit with our partners Certik. The preliminary reports were positive and we’re nearing the closing stages of that process.
Furthermore, great progress has been made on the Nova web app, however it hasn’t all been plain sailing. Our initial Beta testing highlighted challenges with some of the external integrations Nova relies on to operate. Below we outline what those challenges are and what the team has been working to overcome them.
Swaps in Nova
For context, it's worth firstly looking at how swaps are used on the protocol. When you build a portfolio in Nova, we do three things to make portfolio management as easy as possible:
1) we automatically swap your assets into the asset composition defined in the portfolio you either create or join
2) we have a range of trading strategies that you can select to rebalance your portfolio over time
3) we provide opportunities to gain yield returns on those assets. This is achieved by automatically swapping and managing the secondary assets required to participate in liquidity provision activity, such as stablecoin swapping on Saber.
As you can see, swapping assets is a major part of Nova and without it, it is difficult to package up the benefits of DeFi for everyone to use in a non custodial and reliable way.
How liquidity effects swaps
On-chain liquidity has dropped noticeably as the value of crypto assets has declined noticeably in the bear markets. The quantity of assets has also declined as liquidity providers look to avoid impermanent loss and pursue more attractive yield rates. According to DefiLlama, Serum has dropped from $1.6bn worth of liquidity to $120m and other protocols have also experienced similar rates of decline.
While most major assets have sufficient liquidity on Serum, mid to low cap assets on Solana have struggled to maintain liquidity in order to fulfil trades, either via Order Book or AMM services.
When we consider assets to be added to Nova, theres a minimum trade amount that needs to be tradable within a specific liquidity range. If this doesn't happen, the user will encounter slippage. When slippage occurs, the market returns less assets than expected, based on the current rate. It can happen when both buying and selling assets. Slippage is normal and occurs in every trade to some degree but slippage beyond 1% can impact a user's asset value noticeably, especially if they are moving assets through Nova, trading and capturing yield.
With the liquidity decline, we're unable to reliably provide swaps within our standards with Serum alone for some prominent assets in the Solana ecosystem. Its important to be able to create portfolios in Nova with a varied range of assets so instead of significantly cutting back assets accepted, we've been working on making further liquidity accessible for swaps and expanding our functionality to handle sub-optimal slippage rates.
One of the main things we've done in recent times is to integrate Orca and add it to the liquidity roster within Nova. With current liquidity locked, this nearly doubles the amount of liquidity accessible to Nova. Routing is also a more natural process within Orca and increases the opportunity and chance we have to fulfil swaps as required within Portfolios.
With extra liquidity sources, we have to conduct further checks before swapping. Our primary goal in this area is to provide users with an acceptable exchange range of assets.
We've been working hard to build functionality that identifies swap paths with acceptable depth. Once detected, we prioritise the best rate that we can for the user.
Optimizing for these requirements will be a constant process that we undertake even post beta launch. We have a number of developments already in the works around improving this area. A longer term solutions is also underway, this includes updating our state machine capabilities to securely allow for direct deposits of assets into our asset management protocol.
Right now we are testing extensively to make sure that the improvements we've made can provide a reliable user experience when scaled out in a live environment.
From speaking to those of you in our community, we know how frustrating delays can be and how excited you all are to try out Nova. Ultimately, we want to deliver a product that you all love and can use reliably to manage portfolios. We're doing so without putting any users under unnecessary risk. Thank you all for your patience and we'll continue to update you as we make progress!
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