Ricochet Exchange: Scaling and Simplifying Dollar-Cost Averaging with Superfluid
DCA Will Not Scale using ERC20 Transfers
Dollar-cost averaging is a challenge because of the number of transactions required to support it. The fees for on-chain transactions mean that doing a periodic DCA may not make economic sense. Additionally, the blockchain network will get backed up if there are millions of individuals trying to do periodic DCA. Block space is a limited resource, the cost required to execute millions of DCA transactions will no scale using ERC20 transfers.
Challenges facing DCA on-chain
- Network fees per transaction make DCA economically infeasible for small amounts
- Transactions required for periodic DCA increases linearly with the number of users
- Time consuming for individuals to perform on decentralized exchanges
Ricochet Exchange lets individuals set up DCA with just a few, one-time transactions. Ricochet’s keepers trigger distributions periodically to all the individuals that have set up DCA on Ricochet Exchange. These two features address the challenges mentioned above.
First, there will only be a two transactions to set up DCA which saves the individual money and reduces the fees required to provide a DCA experience. The individual will not pay the fees for each swap transaction in the DCA strategy because it’s taken care of by a keeper. This makes DCA feasible for even small accounts.
Second, the number of transactions no longer scales proportionally to the number of individuals doing DCA. The keeper performs one transaction to pay all individuals using Superfluid’s scaleable Instant Distribution Agreement. This new primitive allows Ricochet to provide a scaleable DCA service. (See table & graphic below)
Third, the keeper automates the process, saving the individuals from manually executing transactions. This is arguable more expensive than the gas used to execute the transactions.
Traditional vs. Ricochet Transaction Count Comparison
The traditional method requires almost 10x more transactions. Using ERC20 transactions this would consume too much gas to scale. The Ricochet method does not use more gas as the number of savers increase. Ricochet uses one transaction to distribute their funds thanks to Superfluid’s Instant Distribution Agreement primitive.
Advantages of DCA on Ricochet Exchange
- Pay less network transactions fees to do DCA
- Makes less transactions on-chain, reducing network bandwidth
- Saves time on executing transactions for DCA because its handled by a keeper
- Get a more accurate DCA price with more frequent swaps
- Added layer of privacy through obscurity, funds are not moved as ERC20 transfers
Learn more about Ricochet
Visit our documentation to learn more about our project: https://docs.ricochet.exchange
