TangleSwap — Upcoming DeFi platform in IOTA ecosystem
Introduction
TangleSwap is a Decentralized Finance (DeFi) platform with a Decentralized Exchange (DEX) as the leading application built on the IOTA network that leverages advanced technology to provide a superior trading experience for users. With its innovative Concentrated Liquidity Market Maker approach and the use of the Oracle Balancer algorithm, TangleSwap offers a number of advantages over traditional DEX. These advantages include faster, more efficient transactions, lower fees, and a more secure and user-friendly platform. In this article, we will explore the key features of TangleSwap, how it works, and why it could become one of the most popular DeFi projects.
TangleSwap DEX
In contrast to many DEX in use today, TangleSwap uses a Concentrated Liquidity Market Maker (CLMM) instead of a traditional Automated Market Maker (AMM), which is also used in the latest version of Uniswap.
A CLMM is a market participant that provides liquidity to a specific market by continuously making two-sided quotes for a particular security or asset. When liquidity providers (LPs) provide liquidity on a CLMM, they can choose a specific price range for their tokens, and the tokens are supplied in “ticks” within that range. The following figure shows a traditional AMM on the left, a CLMM with one price range in the middle and a CLMM on the right where users can choose their own price limits.
This results in more efficient allocation of liquidity compared to traditional AMMs, as the tokens are not spread across a wide range but instead are supplied at or around the current market value. This increases capital efficiency and can lead to more fees earned with fewer tokens deposited, less slippage for traders, and more efficient realization of deep liquidity for projects.
The Oracle Balancer algorithm is a mechanism implemented in the TangleSwap DEX to minimize the risk of impermanent loss on the returns of liquidity providers. It compares the current prices of TangleSwap LPs against data provided by a Chainlink Oracle and, in the case of detecting significant deviations, self-adjusts the Swap fee to compensate for any strong price discrepancy. This increases LP fee revenue until an equilibrium is found, reducing the impact of impermanent loss in volatile market conditions. The goal of the Oracle Balancer algorithm is to ensure the sustainability and stability of the liquidity provision process in the TangleSwap protocol.
TangleSwap as DeFi platform
Besides its DEX TangleSwap is building a comprehensive, user-friendly DeFi hub. With its focus on profitability, scalability, sustainability, and security, TangleSwap has integrated seven state-of-the-art innovations into its platform.
- The functions Token Swaps, Liquidity Provision and Liquidity Farming enable the operation of the TangleSwap DEX, described in the last chapter. For liquidity faming TangleSwap uses “Asteroid Farms” which allowing projects to individually design their reward distribution schemes through any combination of 3 different customizable mechanisms
- Partnering with Multichain.org, TangleSwap integrate their Cross-chain Router Protocol, providing a seamless and secure way for users to move their funds across different platforms and ecosystems using a battle-tested in-house user interface.
- Staking Fields provide a decentralized reputational system for DeFi protocols to incentivize long-lasting, organic growth without centralization by allowing users to stake the protocol’s currency e.g. VOID (TangleSwap upcoming native token) and accumulate decentralized reputational points for steady yield.
- NFT Docking Stations offer users the ability to stake their NFTs from selected collections to generate passive yield in the form of tokens and other rewards.
- Intergalactic Investment Hub provides a platform for investment opportunities with an efficient fundraising platform as well as access to the TangleSwap community and a performance reward for token holders.
Why IOTA?
IOTA is an open-source distributed ledger network that was created to enable secure and fast transactions in the Internet of Things ecosystem. It uses a unique distributed ledger technology called the Tangle, which is a transaction-based Directed Acyclic Graph (DAG) structure that allows parallel and asynchronous processing of transactions. Since the current version of IOTA uses a central coordinator, the upcoming decentralized version is discussed here.
Advantages of IOTA in DeFi
- Scalability: In a DAG, transactions can be processed in parallel, which means that the more transactions there are, the more efficient the network becomes. In addition there are no block size limits which means that the network can accommodate an unlimited number of transactions.
- Low Latency: The Tangle uses a for communication the gossip protocol, where a subset of the validators votes on a transaction. A mama-based consensus mechanism is used, with mana as the internal currency for trust created by holding IOTA tokens. This combination leads to a quick confirmation and processing of transactions.
- Cost-Effective: The Tangle uses a fee-less model, meaning there are no transaction fees.
- Security: The Tangle is designed to be secure and resistant to attacks through its decentralized structure, the use of cryptographic signatures, and a tip selection algorithm that prioritizes secure transactions.
- Native assets: In IOTA, assets (fungible and non-fungible) can be created, transferred and traded directly and natively on the Tangle without the need to execute smart contracts. This represent a significant step forward in the development of decentralized financial systems, enabling secure and efficient transactions.
If you have further interest in IOTA I recommend the brilliant series of articles by IOTA developer Hans Moog here on Medium.
Conclusion
TangleSwap is a DeFi platform with a DEX as the leading application that uses the IOTA network to facilitate fast and secure trades. The Concentrated Liquidity Market Maker approach provides ample liquidity, while the Oracle Balancer algorithm ensures price accuracy. This combination results in faster trades, better prices, and increased security compared to traditional DEXs. Additionally, the use of the IOTA network allows for free and scalable transactions, adding to the overall efficiency and effectiveness of TangleSwap.
The launch of TangleSwap coincides with the release of EVM compatibility on the Shimmer network, IOTA’s experimental network expected by media in the first half of 2023. I am very excited and look forward to using TangleSwap. Many thanks to the team at TangleSwap for providing the unpublished business whitepaper and especially to Tanglestrong for conducting a very interesting interview! Feel free to check out the TangleSwap website.