Introducing Arcadia V2

Overview

Arcadia is a non-custodial platform for asset management focused on unlocking the full potential of DeFi positions.

Arcadia gives users a single on-chain account to access margin, compose a portfolio of multiple yield sources, and improve capital efficiency across underlying DeFi protocols.

Current state

Despite the multitude of challenges faced by DeFi in the past year, our vision for Arcadia remains unchanged: replacing the opaque back-offices of clearinghouses and brokerages with smart contracts.

Arcadia V1, launched on Ethereum and Optimism, served as the first iteration for this vision. Within two months, it attracted $2.47M in deposits, registered over 1300 accounts, and garnered the participation of more than 600 liquidity providers — all without additional incentives.

During this period, we learned important lessons about how users interacted with the protocol and what they found important. These insights form the basis of Arcadia V2. To realize the vision, we raised another round of funding and assembled a team of dedicated individuals who share our passion for shaping the future of Arcadia in collaboration with the broader crypto community.

Arcadia is backed by Global Founders Capital, No Limit Holdings, Psalion, Coinbase Ventures, 4Ward Fund, SpaceshipDAO, Owl Ventures, Keyrock, Ivailo (Daedalus), Adam (Degenscore), Steven (Amber Group), Marc (Mechanism Capital), Fabian (the LAO), Nick (Velodrome), Frank (Volta Ventures), Gus, Vfat, 0xflipstate, lewi, sergey69420, and many more.

The DeFi Landscape

Earning yield in DeFi has largely become the domain of sophisticated institutions equipped with in-house teams with deep technical expertise, especially those adept at crafting and deploying their own set of smart contracts (MEV, algo traders). As a result, only a small number of power users reap the majority of the rewards, while others are pushed towards centralized custodial solutions.

If you operate on-chain today and are not one of these sophisticated institutions, the process for discovering, managing and earning yield involves:

1. Browsing various data aggregators like DefiLlama and Zapper.
2. Either manually weighting the risk/reward for a portfolio using tools like Excel and Dune, or avoiding diversification entirely.
3. Managing numerous positions on different dapps. Swapping, staking, and borrowing often requires multiple transactions, sometimes involving custom contracts. Positions are often scattered across protocols without shared margin.
4. For rebalancing existing portfolios, repeat steps 1 to 3.

Arcadia V2 aims to simplify this, making sophisticated on-chain strategies (like those run by algo traders and arbitrageurs) accessible to everyone. Arcadia V2 offers margin against portfolios of yield-bearing assets, enables management of entire portfolios in a single transaction, and provides a clearer overview of portfolio performance.

At Arcadia we spent a lot of time researching how your average on-chain user could trade (and earn yield) like algo traders and arbitrageurs without having to craft and deploy their own smart contracts. V2 is the answer.

Ultimately, if DeFi aims to democratize access to finance, it must ensure that the process of earning real on-chain yield is accessible to all.

Arcadia V2

Arcadia V2 is the second iteration of Arcadia and includes many new improvements:

• Enhanced UI/UX
• Portfolios
• Optimistic Actions
• Yield Optimizer
• Multicall Calldata Generator

Enhanced UI/UX

One valuable lesson we have learned from Arcadia V1 is that having a versatile protocol with multiple use-cases does not necessitate building out all of those use-cases simultaneously.

During Arcadia V1, we underestimated the challenges involved in creating a well-designed and user-friendly dApp (the off-chain component). Our V1 dApp primarily focused on the smart contracts, providing users with a minimal interface for maximum contract interaction.

With V2, we are taking a completely different approach to dApp development. We are starting with one specific use-case enabled by our smart accounts: constructing, optimizing, and rebalancing portfolios of yield-bearing assets. We will then build an end-to-end solution that adheres to clearly defined, user-oriented design principles:

• We aim to abstract complexities as much as possible without hiding the associated risks.
• Browsing, optimizing, and selecting will provide a familiar web2 experience while keeping the web3 ethos. Only after a user has clearly expressed their intentions will they need to sign a single transaction.

Portfolios

One of the highlights in V2 is the introduction of Portfolio Strategies, which can be visualized as multi-strategy vaults. Instead of solely depending on a single yield source, users can now construct and combine multiple different yield sources in one single position, optimizing returns while mitigating risks. Constructing, rebalancing or changing portfolios will all require a single transaction. Imagine building a portfolio with diverse yield-bearing assets, whether they’re liquid staking tokens, AMM liquidity positions, bonds, or ERC4626s. Enhance those returns using leverage, all while maintaining the advantages of asset diversification and accruing the inherent yield. And 100% non-custodial on-chain.

Optimistic Actions

Arcadia V2 enhances the concept of flashloans. It allows users to borrow, withdraw, and manage assets from their account, with the sole condition being that the account is in a healthy state by the end of the transaction. The assets borrowed and withdrawn integrate fully with the broader DeFi ecosystem, ensuring complete composability. For example, this allows seamless integrations with DEX aggregators and intent-based solutions, ensuring users receive the best on-chain execution when they decide to rebalance their portfolio. This flexibility streamlines the management of collateral and interactions with other DeFi protocols, reducing the number of necessary transactions for users.

Yield Optimizer

A first-of-its-kind off-chain tool, that aids users in constructing, optimizing and rebalancing diversified yield portfolios. It helps users optimize a portfolio of assets taking into account specific user preferences and constraints. For example, users can select a diversified and delta neutral ETH portfolio with 5 different yield bearing assets, optimizing for the 30d average yield.

Multicall Calldata Generator

The calldata generator forms the bridge between the two previously mentioned features. It translates the optimized portfolio into a number of on-chain steps (deposit, borrow, swap, stake, LP…) which are all executed (zapped) in a single transaction. For example, a user can deposit collateral, borrow funds, withdraw previously deposited funds, swap borrowed funds, place a part in an AMM LP position, deposit the rest in a money market and do all that in a single click.

Launch Details

As we approach the launch, we want to shed light on the progress and the road ahead:

• Arcadia V2’s core smart contracts have almost reached completion but are still undergoing rigorous security evaluations. Throughout the coming months, multiple full-scope audits will be performed, ending with a public audit contest.
• We’re in the midst of refining our interface, analytics platform, and accompanying documentation to ensure a seamless transition for our users.
• While our aim remains to unveil Arcadia V2 in Q1 24’, we urge our community to remember that this projection serves as a goal and not a concrete release date.

Users eager for a sneak peek can begin exploring Arcadia V2’s capabilities — just send us a message on discord.

Security

To mitigate smart contract risks, the following measures are taken (non-exhaustive list).

1. Extensive open test suites, with the following tests:

• Each function is fuzz tested over its full state space (input parameters, state variables of its contract, state variables of any other contract the function interacts with).
• Invariant tests.
• Fork tests run for every integrated asset and protocol.
• Scenario tests (or end-to-end test)

2. Multiple formal audits conducted by both tier 1 auditing firms and top-rated independent auditors.

3. Auditing competition.

4. Insurance of Arcadia’s Liquidity pools.

5. Best-in-class automated monitoring solution after deployment.

When

In the coming weeks, we will reveal more about Arcadia V2 and take our community on a journey through its different components. We will cover its inner workings, the launch, tokenomics, and its novel security approach while the protocol goes through multiple audits from the best auditors in the space.

Links

Twitter: https://twitter.com/ArcadiaFi

Community: https://discord.com/invite/PXcr8SEeTH