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QuipuSwap is an automated market-making (AMM) decentralized exchange (DEX) that allows for seamless swapping of Tezos-based tokens and XTZ. What this means is that you may add or trade any FA1.2 or FA2 standard assets without any limitations or restrictions.
The goal of QuipuSwap is to provide users with a future-proof, decentralized platform that follows security, decentralization, and scalability ideals while also functioning as a stand-alone project. It's also an amazing tool for the development of future Tezos blockchain solutions.
QuipuSwap is a feature-rich protocol that improves the Tezos ecosystem in several ways, so let's take a look at some of them:
Anyone can add their FA1.2 or FA2 tokens to QuipuSwap and establish a Trading pair, even if they don't have access to the Tezos protocol itself. This solution may assist new Tezos projects in gaining liquidity by allowing them to trade on the QuipuSwap exchange.
QuipuSwap is not a central authority that determines which tokens gets to be on the market. After you add your token pair to the Liquidity pool, it will become freely tradeable right away.
QuipuSwap is a project that promises to provide XTZ holders with new choices for earning rewards. You may participate in the Liquidity pool by adding your Tokens to it, and you will earn a 0.3 percent commission on each trade operation in this pool as well as baking bonuses.
You can use XTZ tokens to vote for the baker if you join the Liquidity pool with them. Delegated power of XTZ tokens in the pool will be used by the chosen baker, who will pay rewards to all LP token holders. A baker may propose special terms to liquidity providers in order to obtain access to the Liquidity pool.
One of many things that make QuipuSwap great is that it is not only open-source, it is also a transparent project. This means that developers can fork QuipuSwap if they want to create new Tezos DEXes or integrate it into their own dapps.
The QuipuSwap ectosystem is made up of five types of users: bakers, liquidity providers, traders, voters, and developers.
By being a baker your job is to get liquidity providers to vote for you. Most commonly this is done by offering better rewards than the bakers you're competing against.
Liquidity providers are the people who contribute their FA1.2 and FA2 tokens to a liquidity pool, and by doing so earn rewards.
Traders are simply people who swap one token for another. Doing so has a fixed fee which is 0.30%, and that fee goes to the liquidity providers.
As a voter you can stake your shares to vote for a baker. It is also not uncommon to vote against malicious bakers.
One of the things that are so cool about QuipuSwap is that developers can integrate QuipuSwap smart contracts directly into their projects. This allows them to expand the ecosystem by creating interactions with trading interfaces, retail experiences, and much more.
In this section, we'll go through how QuipuSwap works and the basic governance and baking concepts. However we won't dive too deep, so if you wish to read more on this subject we recommend checking out their documentation.
QuipuSwap uses an AAM model that is based on the "Constant Product" formula. The formula is used for price calculations and is as follows:
x * y = k
In this formula x and y are what they call "reserve balances", and k is the invariant that remains unchanged during the trading.
This formula is what decides the exchange price. However the exchange price changes a small amount because of the fee charges. The good thing though is that the fees that have been collected are shared between the LP providers based on how many LP Tokens they hold in the pool.
The QuipuSwap core is made up of two distinct smart contract types:
When a user provides liquidity to a pool the user obtains shares in the form of LP Tokens. These LP Tokens can be used within the ecosystem for other products and are also transferable.
The users also have the option to stake their LP Tokens, which means that they now participate in QuipuSwap governance, and have committed to the protocol.
As of now the LP providers (governors) have the option to vote for which baker the pair's XTZ will be delegated by. If the delegate happens to behave irresponsibly, the LP providers can also ban them.
Each trading pair has its own governance, and the voting power is decided by how many LP Tokens that have been staked. The baker that receives the most votes becomes the delegate, and when it comes to banning bakers it requires a third of the total votes.
One of the benefits of the Tezos blockchain is that it utilises Liquid Proof of Stake, and this is also what enables the QuipuSwap protocol to delegate provided XTZ liquidity for the bakers.
Rewards are equally divided between all liquidity providers. And to make this fair the amount each user receives is based on two things:
This means that the users receives bigger rewards if they have a large amount of tokens that have been in the pool for a long time.
We believe that MadFish (the team behind QuipuSwap) is definitely onto something, and we absolutely recommend that you check out QuipuSwap if you're looking to explore the Tezos Defi ecosystem.
If you wish to join the QuipuSwap community you can join their discord or telegram.
