In this article, we are offering your answers to the most interesting questions about Swop.fi asked at recent AMA sessions.
What is the listing process and strategy of Swop.fi to attract more liquidity? What are the criteria for a project to be listed on Swop.fi, and how does Swop.fi choose projects to be listed to compete with other AMM DEXes?
The Swop.fi team has been focused on initially listing the most important assets that will attract significant liquidity and attention from the community — all major Waves assets. We’ve also launched pools with USDT and USDC, the two assets that we know are important in the Ethereum and BSC ecosystems. New assets will be listed but we’ll focus on attracting liquidity, and the community will have a say on future listings.
The second question is about adding the right pairs that attract liquidity. But, more importantly, a lot of people are currently adding liquidity to Swop.fi pools because of the high returns they are getting. The service’s very simple UI and the high returns are really attracting users to the pools, and that was the idea — to launch a governance token and give everyone a fair chance of participating. We had 1 million SWOP tokens distributed to incentivize the early liquidity providers that will be made available within one year, and there is another 1 million SWOPs that will be distributed during the first year of operation. Right now, it’s surely working, as there’s more than $40 million in liquidity locked on Swop.fi. What’s important to understand is that by putting liquidity in the pools, you make money in different ways. All pools have USDN or EURN as one of the assets, except for one pool, WAVES-BTC. USDN staking pays an 8–15% base APY. Then, liquidity providers collect part of the swap fees that every pool generates (the remainder is spent on buying SWOP tokens from the SWOP/USDN pool). Then, you can stake your share tokens, which in some other services are referred to as LP tokens, to farm SWOP tokens. And, finally, you can stake your farmed SWOP tokens and receive the governance reward.
SWOP is a governance token: users will be able to vote with it on major settings of the entire Swop.fi system. Can you explain this in more detail?
SWOP is the central token in the Swop.fi system. You can earn SWOPs by staking your share tokens. If you provide liquidity to one of the pools, you get share tokens from the smart contract. These can be staked, and you can farm SWOPs. It means, you can only earn SWOPs by participating in the service’s operation. In the longer term, most major decisions in Swop.fi will be made through governance voting with SWOP tokens. SWOP holders will have the right to decide what is next for Swop.fi, voting on system parameters, changes in pool weights or future tech developments.
Swop.fi operates on the AMM model. What is the difference between a traditional order-book exchange and an AMM?
To exchange asset A owned by holder 1 for asset B owned by holder 2 on a traditional order-book exchange, you need several things. First, you need custody of assets, which could be centralized or decentralized. Then, you need a matching engine — a system that creates a large overview of all buy and sell orders created by users, and, if two orders match together executes them. Finally, you need a settlement mechanism — a system to transfer the swapped assets to the new owners.
The problem is that liquidity for a specific coin pair, available on a traditional exchange’s order book, which is just a large logbook of all open buy and sell orders, is spread out across different prices. As a result, if a user wants to sell a large amount of coins, they will experience slippage, meaning that some of the coins will be sold at a lower value than the current market price, because there are not enough orders in the order book for that trade size.
Therefore, order book-based trading is great for traders looking for flexibility to choose prices but not so good for liquidity depth. An AMM does the opposite, as liquidity is no longer in an order book with different prices, but is placed in a pool. if prices fluctuate, prices in the entire pool fluctuate. If someone wants to buy or sell, they can buy (within certain price-formula limits) as much as they wish, as long as there is enough liquidity in the pool (so it doesn’t get out of balance, like with 100 coins X and 0 coins Y). This creates much more liquidity depth in a unique, fully decentralized way.
On an AMM, a user gets better liquidity in exchange for no longer being able to pre-determine the price of their bid. Meanwhile, liquidity providers have an incentive to deposit their coins in a pool and collect rewards.
As a result, AMMs offer a more efficient and financially attractive model that works for anyone, small and big traders alike.
Does Swop.fi offer lower fees and higher speed compared to platforms running on Ethereum?
Swop.fi operates on the Waves protocol, which, thanks to its high throughput, offers minimal fees of 0.005 WAVES, which is roughly $0.05.
The average speed of a transaction’s adding to the Waves blockchain is just 3–5 seconds even with the minimal fee. Small fees and high speed are major components of user experience on Swop.fi, as differences with other protocols, such as Ethereum, is huge. Sending a transaction on Ethereum could cost $30 and up and take a few minutes. In addition to poorer user experience, this increases the probability of slippage — a situation when someone else’s transaction is written to the blockchain before yours, changing your deal’s parameters.
What are the most important goals of the Swop.fi project in 2021?
As discussed in this article on 2021 plans, Swop.fi has several main goals:
One is custom pools, or an opportunity to launch your own pools. This will be the easiest way to make a market for your token, as there will be no hassle of creating orders on the exchange, and no special skills will be required.
With just a couple of clicks, you will be able to add, for instance, pools of your token in a pair with popular cryptocurrencies, such as WAVES, USDN or BTC. All you need is to have tokens to deposit. Once created, the pools will work by themselves.
Another major goal is the Swop.fi API. Once the basic Swop.fi functionality is ready, we are going to deploy an API that provides data for our markets, such as liquidity, volumes, prices, etc. This data can be used in various ways, including the representation of our project on DappRadar, CoinMarketCap and CoinGecko.
The highest point of our plan for 2021 is offering our users access to inter-chain liquidity. They’ll be able to add and remove liquidity directly from accounts on other blockchains. Interaction between a user’s account and the Swop.fi smart contract will be done via gateways based on the Gravity inter-chain communication protocol. This feature will turn Swop.fi into a service with mainstream appeal.
Also, the voting functionality will be launched, smart contracts will be audited to further ensure their security, and Ledger support will be added.
Your project is perfect , and I noticed that it contains many advantages and rewards, but is it secure enough for users?
The security of Swop.fi is ensured by the use of the Ride smart contracts language. Ride is one of the most secure languages for smart contracts. Also, smart contract audits will be run shortly.
Do you have a target market? Is this a global project?
Swop.fi is a global project, for sure, and we’re not targeting any specific local community.
Will ERC-20 tokens be added to Swop.fi pools soon?
ERC-20 tokens, USDT and USDC, are already available on Swop.fi. These are wrapped tokens from Waves.Exchange, so if Waves.Exchange, the Gravity team or other teams bring more ERC-20 tokens to the Waves ecosystem, they can appear on Swop.fi, as well. More ERC-20 tokens will appear on Swop.fi in the future, but the requirement here is to have gateways to the Waves ecosystem.
Are there ways to improve AMMs? How will Swop.fi deal with current limitations of AMMs, such as leverage, shorts and impermanent loss? Are there plans to introduce on-chain order books?
There are many ideas and ongoing research by Swop.fi into these topics. Right now, on-chain order books look like nothing new and are actually not needed, because the main feature of AMM is trading without any order books. If you prefer traditional order-book trading, use Waves.Exchange. Regarding impermanent loss, this is a disadvantage, but, unfortunately, we cannot fully avoid it because of AMM’s nature and design. Products like leverage and shorts will appear in the Waves ecosystem on top of existing protocols, but not necessarily as part of Swop.fi.
Is Swop.fi really profitable? How come is the APY so high?
This is discussed in great detail in our recent article. Please, check it out.
What is the difference in providing liquidity to the USDT / USDN and USDTLP / USDN pools?
USDT is Tether USD, which is very well-known in the crypto space. Waves.Exchange provides a staking service for USDT, based on Ethereum dApps, like Curve or Uniswap. So, when you stake USDT, you get USDTLP tokens, and those tokens can be used to provide liquidity on Swop.fi. Simply put, you can stake USDT to earn around ~50%, get USDTLP and use those tokens to provide liquidity on Swop.fi to earn even more. Recently, we released a video about these tokens and getting an APY of more than 100%:
There are five main problems prevalent in cryptography and blockchain: excessive volatility, security, scalability, interoperability, transaction speed. How does Swop.fi plan to overcome these problems?
The Waves protocol, which Swop.fi is based on, aims to solve these problems: its throughput is more than sufficient, transactions are very fast (3–5 sec) and cheap (about $0.05), while smart contracts are secure, thanks to the non-Turing complete language Ride, designed by the Waves protocol dev team. To fight volatility issues, Swop.fi supports various trading pairs, allowing investors to diversify their savings.
Currently, staking is a very popular topic. Can you, please. explain the specifics and benefits of SWOP staking?
There is a staking functionality for the SWOP token. Its holders can stake their assets on the Investments > Governance page with a current APY of about 50%. Where does this revenue come from? 40% of fees in every trading pair is used as the governance fee to buy back SWOP tokens (no more than 1% of the pool) and distribute them to SWOP stakers. This enables additional buy pressure and makes the system stable.
What effect does SWOP have on the Swop.fi system? What are benefits for SWOP holders?
SWOP holders will be able to vote on system parameters, for instance, on pool weights, and impact the product development directions. At the same time, SWOP is profitable to investors, allowing them to get an APY of up to 50% on staking and up to 200% on providing liquidity to the SWOP/USDN pool.
Can we list our own token on Swop.fi?
As mentioned above, the custom pool feature is now in development and will be available in a couple of months. We believe that this step will greatly boost the adoption of Swop.fi and attract more interesting projects with their communities.