Decentralize Wallet
As ESwap is a decentralized trading platform built on Ethereum smart contracts, most cryptocurrency wallets applicable to the Ethereum chain may be linked to and used by ESwap, including MetaMask, imToken, Trust Wallet, Huobi Wallets, and so on.
No Third Party
The biggest feature of the decentralized trading platform is the elimination for the participation of third parties and order book in blockchain finance through the usage of Smart Contracts to achieve financial decentralization and matching of order.
Liquidity Pool
Unlike a centralized trading platform in the form of an order book, there is no order book in ESwap. The exchange rates of tokens are determined by POOL, which means that price fluctuations are determined based on user transaction volume.
AMM
Automated Market-Maker
Provide Liquidity
The exchange basis of ESwap is entirely derived from liquidity added by Liquidity Providers. This rule shall always apply, therefore, all Liquidity Providers are incentivized to deposit tokens proportionate to market exchange rates.
How It Works
Transactions in general trading platforms and traditional stock markets are conducted via order books, which means that buyers and sellers define their orders separately. Buyers typically want to buy at the lowest price, whilst sellers aim to sell at the highest price. In such situations, both parties may not reach a consensus, rendering transactions incomplete.
During such a time, a Market-Maker must appear to facilitate transactions where it will accept buy and sell orders to generate liquidity, thus allowing users to trade without the other party’s appearance.
In ESwap, every user may become a Market-Maker or Liquidity Provider (LP) to provide liquidity for ESwap. The LP possess the simple role of creating ETH-stablecoin trading pairs to increase the pair’s reserves. With more ETH reserves, the trading price of stablecoins are more balanced, and paired tokens possess higher liquidity.
Protocol Overview
ESwap Operation Mode
The automatic Market-Making agreement is like a store with basic functions. In ESwap, the Liquidity Provider plays both the roles recycler and a seller roles. ESwap can provide exchange services for any two ERC20 tokens, but Liquidity Providers are required for this.
Liquidity Provider
The exchange basis of ESwap is entirely derived from liquidity added by Liquidity Providers. When there are no tokens in the reserve, users may add liquidity in any proportion and the first Liquidity Provider shall be the provider who sets the initial price of the mining pool. Expectedly, a proportionate risk of loss shall also be assumed. For example, if the first Liquidity Provider deposits tokens into the trading pair at a rate different from the current market exchange rate, it immediately creates profitable arbitrage opportunities for other users to easily take advantage of, thus bringing exchange rates back to market prices. This rule shall always apply, therefore, all Liquidity Providers are incentivized to deposit tokens proportionate to market exchange rates.
Automated Market-Maker Algorithm
Therefore, if you use 50 Ethereum to exchange for USDT, the assets received are 150 Ethereum * (100-X) USDT = 10,000, where “X” is the asset received, which is 33.33 USDT. In this instance, an obvious large slippage has occurred, and the only way to reduce this slippage is for more participants to provide liquidity support. If bilateral reserves at this time are 10,000 Ethereum: 10,000 USDT, then the product, “K”, is 100,000,000.
During this time, we are still redeeming with 50 Ethereum, and by applying the formula, 10,050 Ethereum * (10000-X) USDT = 100,000,000, and “X” is calculated as 49.75 USDT. With reserves that are large enough, more quantities may be obtained the best price. To attract users in providing liquidity, ESwap shall re-inject 0.4% of the token amounts paid for each exchange into the reserve. Given that, handling fees are shared equally among all liquidity providers, which is one of our value capture methods.
Ecosystem Participants