The New Year celebration has passed, and it’s time to share other important updates we plan to introduce in QuipuSwap v3. In our previous article, we talked about Concentrate and Active liquidity features. Let us introduce other essential components: flexible fees, non-fungible liquidity, and advanced oracles.
Flexible fees
QuipuSwap v3 will provide the possibility to set up custom fee tiers for new liquidity pools that allow liquidity providers earn commissions and take a minimal risk in correlated pairs ( stable pairs) and compensate potential losses via higher fees for non-correlated pairs (like TEZ-Stable pairs). From the launch, three tiers will be available, and we expect that the following principle will apply to them:
– 0.05% fee for like-kind assets: uUSD-kUSD, uBTC-tzBTC, etc
– 0.3% fee for popular trading pairs TEZ-USDT, TEZ-QUIPU, etc
– 1% fee for high volatile or non-common trading pairs.
However, pool creators may choose a different approach in customizing swap fees and, for instance, set up a small fee for a volatile pool to motivate traders to use this pool more often.
Non-Fungible liquidity
Because every liquidity provider creates their price curve and sets up their conditions of liquidity usage – it is impossible to use the standard liquidity tokens. For this reason, all liquidity tokens will be NFTs with custom parameters that are adjusted in the process of adding liquidity that represent separate positions in the liquidity pool.
Because of the uniqueness of each NFT, it will be impossible to use them in current farming programs, so the main earnings will come from trading fees.
Furthermore, trading fees will not be automatically reinvested into liquidity pools as it was in QuipuSwap V2. A liquidity provider needs to claim them manually. Also, fees will be automatically collected in the process of adding/removing liquidity from the pool.
Advanced oracles
TWAP on QuipuSwap v3 calculates the geometric mean of the relative prices of the two assets in a pool. Because of possible small liquidity, spot prices can be easy and relatively cheap to manipulate on the DEX; for this reason, we have been using TWAP with a long window of a few days by the following formula:
A price oracle is a tool that allows getting price information about any given asset from the QuipuSwap DEX and using this data in the smart contracts of other DeFi protocols on Tezos. For this reason, we built decentralized and manipulation-resistant on-chain price oracles – time-weighted geometric mean (TWAP) oracles.
The accumulator at any given time is equal to the sum of 𝑙𝑜𝑔1.0001 (𝑃) for every second in the history of the contract.
This delay allows arbitrageurs to equalize the price and bring it in line with market conditions, and, as a consequence, TWAP should always be close to the market price.
License
The original code that we forked and updated was the Segmented-cfmm implementation. Following the principles that the creators of this repository established, QuipuSwap V3 will be open-source and distributed using the MIT license. We hope our solution will help attract more developers to Tezos and make it easier for other teams to integrate QuipuSwap V3 features in their projects.
Conclusion
QuipuSwap v3 is the next step of DEX development that provides unique features for effective capital management; however, they will require some initial knowledge from liquidity providers to set up correct price ranges and build their strategies for adding/removing liquidity from the pools. Wrong usage may cause losses because of impermanent loss, while proper techniques significantly increase capital effectiveness and allow users to earn much more from the same liquidity amount.
In our following publications, we may share more info about upcoming QuipuSwap updates and ideas on how to use QuipuSwap v3 more effectively. Never miss our new publications, follow us on twitter or join our telegram channel.
