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There are well-known examples of transactions that don’t require an automation network or that can easily be solved by a simple synthetic premium offered to anyone who will call a contract. However, there are many important existing examples where automation networks can improve efficiency:
- 1.Automated collateralization ratio maintenance for CDPs and lending markets. For example, the losses in the case of a stETH de-peg could be decreased for looped stETH/ETH AAVE positions.
- 2.Relayers: for example the Tornado.cash relayers service was sometimes unavailable, leading to a very poor user experience. This problem has existed since day one, according to TornadoCash founders. An automation network with guaranteed execution could solve this issue.
- 3.Updating sensitive protocol parameters that should be updated with very narrow conditions, for example, automated capital allocations strategies that could require our proposed solution to exit a position ASAP in extreme conditions.
- 5.Limit orders on DEXs
- 6.Automated fund-management strategies such as Vaults/yield aggregation, which account for the major share of the Defi market
- 7.Balancer v2 asset managers require automation to maintain asset reserves in the pool and transfer yield to pool LPs. Balancer v2 was released in Q2 2021, but there are still no v2 asset managers live. We are talking about the ‘classic’ idea of asset managers here, not about famous linear pools or similar implementations that also could be defined as v2 asset managers. Using Balancer v2 (or similar forks) for AMMs with asset managers isn’t yet widely adopted, largely due to the lack of reliable on-chain automation solutions.