The problem Flux Finance solves

FluX is an MVP of a DeFi product focused on adjusting liquidity provided between a Uniswap v4 swapping pair and a lending pool on Silo Finance v2. By allocating dynamically liquidity between these two DeFi protocols, it aims to optimise revenues for lenders and liquidity providers.

Liquidity providers on Uniswap v4 can often end up not generating any revenues from swapping fees for the liquidity they have provided to the pool because their liquidity is configured to be used on certain price ranges.

This creates scenarios where their liquidity is "idled" because it does not fall in the price range they have provided.

FluX solves this problem by re-allocating automatically idle liquidity into lending protocol that use Silo Finance v2.

FluX goal is to optimize liquidity allocation between DeFi markets. In this MVP it balances liquidity between swapping and lending pool, in order to not let liquidity idle (not generating revenue).

User Interaction and Data Flow

Lender can grant permission to FluX protocol to move liquidity on their behalf between these two DeFi protocols. This is based on when the price for the pair like ETH / USDC is out of range and not used in the Uniswap v4 pool. If this is the case, then the FluX Finance protocol will move liquidity out of Uniswap to put liquidity into Silo Finance v2 protocol, where the liquidity can be used to earn interests on borrowing, rather than idle in Uniswap v4.

The same process occurs on the other hand in Silo Finance. When a user borrows, the hook before borrowing is used to check if the Uniswap v4 pair went back to the price the liquidity provider configured it for. If this is the case, some of the liquidity is moved out of Silo Finance back to Uniswap v4, where the liquidity provider can then earn again on swapping fees.

The project architecture and development process

Development was done with the Foundry starter repository from Silo Finance.
The following dependencies were added: Uniswap v4 hooks, ChainLink data feed aggregator.
The repository was constructed to ensure it builds and the contracts compile.

Product Integrations

FluX Finance integrates the following protocols and services.

• Uniswap v4 hook beforeSwap
• SiloFinance v2 hook beforeAction(BORROW)
• ChainLink data feed to retrieve price of token pairs (e.g: ETH / USDC)

Key differentiators and uniqueness of the project

This project is unique as it make a smart contract acts as a rebalancer, rebalancing liquidity between two DeFi protocols and pools. It's unique as a smart contract implements hooks from two different protocols. It enables to shift liquidity seamlessly between Uniswap and Silo the lending protocol.