Smoothy.Finance: low cost, zero slip point, stability currency Swap | project introduction

Since the types of stabilizers supported by the various DeFi projects are not the same, the 1:1 exchange between stabilizers is the only requirement in the DeFi ecosystem.

For example, the mining coin pair for the mobile mining project supports only one specific stability coin (Bakery only supports BUSD). Then, before the project goes online, the demand for this stability currency will surge, and the lack of liquidity will cause a serious price slide due to the large purchase.

At the same time, the Gas fees caused by users injecting liquidity into the liquidity pool also make users feel headache, and may even cause users to refuse to use the application.

Curve and mStable are two representative exchange items of stable currency. However, these two items do not provide good solutions to the problems of Gas cost and price sliding point.

Smoothy solves high Gas charges and slip points with a new single liquidity pool solution that maximizes interest returns for liquidity providers.

The tradeoff between costs and benefits

First, let's look at the trade-off between high Gas fees and user benefits. The composability of DeFi applications allows multiple applications to interact with each other at will, which gives the application unlimited imagination, and the combination of different applications allows users to enjoy the benefits that CeFi cannot bring.

As liquidity providers of decentralized exchanges or lending platforms, users can get not only higher interest rates but also transaction fees as incentives to provide liquidity without the resistance of intermediaries. However, this is all based on a large number of interactions between contracts, and the high cost of Gas becomes a problem.

Curve solves this problem by dividing the liquidity pool into two types, the lending pool and the trading pool, where users have to weigh expenses against benefits.

A lending pool is a pool in which users receive not only transaction fees but also interest on their loans (plus liquidity mining incentives) when providing liquidity to the pool. However, users have to pay high Gas fees when they inject liquidity (yPool estimated the cost at the time of writing to be $43). MStable's liquidity pool is also in the lending category.

A transaction Pool is one in which the user can only receive a transaction fee incentive (plus a liquidity mining incentive) for providing liquidity to the Pool, but the Gas fees incurred by injecting liquidity are much lower than those incurred by the lending Pool (sUSD Pool estimated the cost at the time of writing to be $8).

Smoothy's single liquidity pool draws on Banks' reserve systems and USES a dynamic reserve ratio algorithm to match loans and trades in real time. Most of the money in the liquidity pool will be used for borrowing and lending to generate interest, with the rest used for daily stability-currency exchange transactions. Because there is not much interaction with other DeFi protocols, Gas charges are reduced by about 80% compared to Curve's yPool and mStable.

The Smoothy liquidity pool will hold 10% of its preset funds in exchange transactions and 90% in interest-earning convertivities like Aave and Compound lending agreements. The proportion of money spent on trading will fluctuate between 0% and 20% depending on demand. When the ratio is not in this range, the protocol automatically resets the ratio to 10%. In this way, the returns of the funds in the pool are maximized while the daily exchange transactions are not affected.

0 Slide point solution

Price slippage is a headache for all DEX. Users may reluctantly accept the slippage caused by trading project tokens, but for the exchange between stable COINS, excessive slippage is an unnecessary loss.

Both Curve and mStable sliding point solutions are based on design improvements of trading algorithms. Curve's sliding point problem, though less severe than Uniswap's, does not guarantee 1:1 stabilization. Although mStable ensures 1:1 conversion, the weight of the trading currency in the pool needs to be kept within the preset threshold, and if the threshold is exceeded, the transaction will be banned. So neither Curve nor mStable completely solves the price slide.

Smoothy's solution is to guarantee 1:1 conversions within preset thresholds. However, if the weight of the currency in the pool exceeds a threshold, the transaction will still be completed, but the user will be punished to some extent.

Above is a comparison of Smoothy's official data

We can see from the figure that the Gas cost of using Smoothy is significantly lower than that of the other three competing products, and ensures a zero slip point.

Smoothy now supports six stability currency swaps, including USDT, USDC, DAI, TUSD and sUSD.

Governs the allocation and value capture of tokens

SMTY is Smoothy's governance token, which will be used to decentralize governance over projects and encourage liquidity.

The initial exchange transaction fee is set at 0.04%, of which 0.03% will be distributed to liquidity providers and 0.01% will be converted to SMTY and burned permanently.

95% of the interest income will be distributed to liquidity providers, and the remaining 5% will be converted to SMTY for permanent destruction.

SMTY will have no pre - dig, private placement and team reservations. Users can only receive SMTY by applying to participate in the test network or by providing liquidity after the main network goes live in September.

With regard to SMTY release rate, Smoothy adopts pseudo-total-supply emission algorithm to synthesize fixed-rate release (no upper limit of total volume) mode and timed reduction (fixed volume) mode. In other words, SMTY will not be as inflationary as fixed-rate scrip, but it will continue to attract liquidity providers to participate in the long run.

While Smoothy tries to eliminate slip-points by penalizing users, it argues that users will still lose money if they have a large exchange requirement and the currency is close to a weighted threshold. Users need to compare the cost of Smoothy's penalties against the loss of Smoothy points. Since this project was just released on September 7, there are many mechanisms that need to be further refined.

Welcome to join the official BlockBeats community:

Telegram Subscription Group: https://t.me/theblockbeats

Telegram Discussion Group: https://t.me/BlockBeats_App

Official Twitter Account: https://twitter.com/BlockBeatsAsia