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The troubled world of automated market makers and how MantisSwap solves these problems with its innovative design.
Automated Market Makers (AMMs) have been a major innovation in decentralised finance (DeFi), enabling traders to swap tokens on-chain in a decentralised manner while allowing liquidity providers to earn a yield on their tokens and accruing trading fees in return. However, traditional AMMs share similar shortcomings in their design, specifically around impermanent loss risk and capital inefficiencies.
- Fragmented Liquidity - The liquidity of different pools cannot be shared with one another due to the closed liquidity pool design in first-generation stableswaps, resulting in less-than-ideal slippages and indirect trades.
- Impermanent Loss - Providing 50/50 paired liquidity is expensive for an individual and has the looming risk of impermanent loss.
- Complex Pool Design - The design of other stableswaps requires multiple tokens of equal value within a pool, complicating pool compositions and hindering the scalability of the protocol.
- Insufficient Risk Management - Liquidity providers suffer the maximum loss in the event of depegging of an asset as there is no mechanism to prevent or minimise losses.
MantisSwap has four core features that makes it stand out from other AMMs:
- Single-Sided Liquidity - Instead of having to deposit both tokens in a classic liquidity pool, liquidity providers only need to deposit one token.
- Open Pool Design - While other AMMs have fragmented liquidity amongst pools, on MantisSwap liquidity is shared between tokens, allowing token swapping from different pools and enabling higher capital efficiency of the system.
- Flexible Architecture - The pool design of Mantis allows multiple tokens of the same kind to be accommodated in a single liquidity pool, enabling deeper liquidity for each asset.
- Autonomous Loss Protection - MantisSwap design features a novel mechanism to minimise losses due to the volatility risk associated with various pegged assets using internal pool metrics rather than depending fully on oracles.