How Solana Will Help DeFi Swap Protocols

There is a lot of buzz happening in the Twittersphere right now with DeFi Swap Protocols, with suggested Exit Scams and Paralyzing $50 gas fees. The competition is fierce and we are seeing the whole DeFi market evolving to bring better and better DeFi products to consumers.

DeFi Swaps Protocols, are a decentralised way for people to swap a token for another token. This would traditionally be done on an centralised exchange where the price of the swap was determined by a market of buyers and sellers and a fee is charged.

When decentralised exchanges came into existence, they often had problems with generating liquidity. Around 2 years ago, Uniswap was built to solve this problem by generating these liquidity markets automatically. The Ethereum based Uniswap does the same job as exchanges, but uses a simple math equation and pools ETH and tokens.

Who are the Biggest DeFi Swap Protocols Right Now?

Check out this great comparison article over at CMC Blog where they compare the top DeFi Swap Protocols.

On Anyswap, users can safely trade coins and tokens without worrying about buying scam tokens. Moreover, Anyswap uses an already established cross-chain technology, and it is the only exchange that rewards all the users, including swap traders, for using the platform.

Uniswap, is a reputable swapping protocol among the Ethereum community. However, it is limited to Ethereum blockchain, and its other main issue is that it makes it easier for scammers to list fake tokens and steal users’ money.

The third exchange we reviewed is Trustswap. Currently, there is a lot of hype around this project that promises a lot of interesting features in its whitepaper. However, very few technical details are provided on how the team will implement these features.

All things considered, Anyswap seems to be the best exchange when it comes to liquidity and security, and the most suitable option in terms of cross-chain DeFi.

CoinMarketCap Blog – 25th Aug 2020

Enter the Binance Swap Product, Binance Liquid Swap

Another day, another Swap Product gets released. It is the 4th of September, 2020 and this time it is Binance has released their own Automated Market Maker (AMM) called Binance Liquid Swap. It is an automated mechanism thats provides more stable prices and low fees for large transactions.

Source: Twitter

The way it works technically is as follows:

Select a pool of liquid trading pairs and deposit an amount (collateral) into the pool. The system will convert the amount into two tokens according to the price ratio of the current trading pair pool and fill the liquidity pool with a certain amount of pool share. After staking, the pool share can be redeemed at any time, and the redeemed pool share will be saved.

Crypto News Flash

You can read their FAQ here:

What is the difference between Binance Liquid Swap and other trading functions?

Binance Liquid Swap is based on a pool of liquidity. There are two tokens in each pool, and the relative amount of tokens determines the price between them and can always be traded as long as there are corresponding tokens in the pool. Binance Liquid Swap offers more stable prices and lower fees for large transactions.

At the time of writing the fees are very low, at only 0.04% and are enabled for the following pairs: USDT/BUSD, BUSD/DAI and USDT/DAI. However, there are some concerns as the fees is fixed to be quite low, it is unlikely that people who contribute to the pool would get much APY.

Here Comes SushiSwap !

SushiSwap was released on 29th August 2020 and was able to to got to $250M USD worth of value locked into it’s smart contract after 24 hours of it’s release. (At peak it hit $1.4B TVL)

SushiSwap is a fork of the opensource project Uniswap, that adds the token dynamics of $SUSHI, where token holders have governance rights to determine the future development direction of the project and to receive a portion of fees.

Source: Twitter

To get the liquity in the SushiSwap protocol started, the project decided to take liquidity from it’s parent UniSwap. This is quite controversial but let’s see how that goes.

Since then, the total value locked (USD) on 6th September is $860M according to the SushiBoard, which is 68.8% of the value that is locked up in its forked parent Uniswap! Amazing for just being launched a week ago.

Let the SushiSwap Drama Begin…

On the 4th of September, Quantstamp did a security audit the SushiSwap Smart Contracts and found 10 issues, releasing them in a report highlighting that 2 were medium risk, 3 were low risk:

Source: Twitter

Also on the 4th of September and something positive and not so dramatic. Sam Bankman-Fried (CEO of FTX) submitted a proposal for SushiSwap to start building out support for Solana.

Source: Twitter

The full proposal is detailed in this google document:

The Proposal from the Serum Ecosystem

  1. The Sushi community builds out support for Sushiswap on Solana
  2. Sushi rewards are paid to both Ethereum and Solana/Serum based Sushiswap
    1. Proportional to the TLV in each
    2. Or alternately fixed to each pool
    3. Open to other suggestions as well–what’s fair?
  3. The Sushi community composes this with the Serum orderbooks
    1. Each Sushi pool has a curve, currently constant-product
    2. The pool sends bids/offers into the associated Serum orderbook to simulate that curve
    3. This allows the Sushi AMM to share liquidity and volume with the orderbook
    4. There are maker rebates on Serum orderbooks that the AMMs would capture; they can also add on their own fees
  4. FTX has a bridge from ERC20 <> SPL (Solana token) Sushi; in the next week, will as well
  5. Sushi will also be able to compose with a borrow/lending protocol on Serum to allow the pools to trade on margin, though that’s not necessary for V1
  6. To clarify: Sushi would not be moving off of Etherum in any way; this would be an addition, not a replacement.

Timeline to Execute this Proposal

The target would be for pieces of this to roll out within a month, and completion before the end of 2020.  The assumption is that work would not start in earnest until after the Sushiswap migration is complete.

Then the drama started to happen a day or so later…

Developer Allocated $SUSHI Funds Get Sold Off

In some of the biggest Crypto news this week, the main developer behind SushiSwap sold off some of the $SUSHI to fund further development and security audits for the project.

Source: Twitter

However as per the SushiSwap Blog this was planned all along, naturally as a Dev Fund. The issue here seems to be that it was not announced to the community and that it was then misinterpreted big time!!!

In order to save the SushiSwap project, Chef Nomi then transfers control to SBF – CEO of FTX and Big Boss of Serum

Source: Twitter

Sam has Saved SushiSwap !

Source: Twitter

So, How Can Solana Help DeFi Swap Protocols Like Sushi?

The underlying Solana Blockchain is crazy fast and does not need Layer 2 Sharding solutions to scale. It is not as complex to support and develop upon. There is one Layer 1 chain and that’s it.

The speed of Solana is crazy fast at 56,000 TPS and has block times of 400ms. Solana is way cheaper than Ethereum for blockchain projects. The current cost per transactions is $0.00001 and ETH Gas prices suck, with many DeFi consumers experiencing >$30 fees making the switch is a no brainer. Solana is as decentralised as it gets, with 135 active validators on Mainnet.

Furthermore, there is a massive Serum ecosystem building upon Solana.

Source: Twitter

You can read more about Why DeFi Building on Solana is Going to Be Fantastic here!

Visit the Official Solana Website to join the community, start developing, prepare your staking or contact the team!

Follow Us on Twitter and Participate in the DeFi Swap Conversation

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