A DEX is a decentralized crypto exchange that provides access to digital assets without a middleman. Rather than relying on companies to enter and record crypto transactions, DEXs offer peer-to-peer (P2P) token swaps using blockchain technology. More specifically, DEXs use smart contracts to execute transactions. Smart contracts automatically execute orders when various predefined characteristics are met.
However, decentralized exchanges face various risks related to segmented liquidity, disjointed user experience, and network scalability. DEXs present a daunting challenge for regulators, but offer promising opportunities for innovation in asset exchanges.
With this, I present Zeus swap. One of the foremost questions that might be circling your mind right now would be, “what is Zeus swap?”
Zeus is a liquidity protocol based on the Metis blockchain. Through the process of building a centralized liquidity protocol and a series of affiliate functional modules on the MetisDAO L2 blockchain, we are focused on providing DeFi users with a better trading experience and improved capital efficiency.
What are these wrongs in the Defi ecosystem that Zeus is setting right?
These wrongs might include;
1) Low utilisation of liquidity, which means the price impact will be greater, resulting in a net loss for the trader. This has forced the trader to look for other ways to reduce his LP volume and fees.
2) Large slippage and price impacts for traders due to inefficient deployment of liquidity.
3) Capital ineffeciency: For liquidity providers, the only way to take advantage of swap fees is to add an equal amount of liquidity to the pool and hope that the price did not diverge significantly when trading volume was high. Which is achievable, but also introduces inefficiencies.
4) Limited customization in liquidity provision: This was an intentional design to make liquidity delivery complementary, but limits LPs who were able to develop sophisticated liquidity delivery strategies which made LPs frozen and unable to react in the face of dynamic market regimes, as the only action they could take was to add and remove liquidity.
5) Low ROIs for LPs.
How does Zeus tackles this wrongs?
By introducing the following
1) Concentrated Liquidity: This refers to the ability for liquidity providers (LPs) to select a particular range along the price curve to provide liquidity. When liquidity was distributed evenly, one could trade their assets within the infinite interval (0,∞). With the concentrated liquidity mechanics, liquidity providers (LPs) can accumulate their capital to smaller price intervals than (0, ∞) which enables individualized price curves, higher capital efficiency and deeper liquidity for traders.
2) NFTs as LP Tokens: LPs now set custom liquidity ranges and can no longer represent positions in fungible tokens like ERC-20. All liquidity offered will be unique with a custom price tier + custom quantity, so the liquidity offered must be represented by a unique, non-fungible token.
3) Flexible Fees: Zeus Swap offers multiple fee tiers when creating liquidity pools. LPs may choose to create low fee pools on low volatility pairs to generate more trading volume, or high fee tiers on pairs expected to be highly volatile to offset risk can be selected.
Other features of Zeus swap includes:
- Swapping of tokens
- Staking of liquidity contributions at Zeus farm to start earning.
In conclusion, Zeus Swap aims to become a bridge between the Metis and other chains with concentrated liquidity. Therefore focusing on liquidity supply and swap.
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