WOO Network is proud to announce the alpha launch of WOOFi Swap, a new decentralized exchange platform running on Binance Smart Chain. For WOOFi Swap, we developed a brand new on-chain market-making algorithm called Synthetic Proactive Market Making (sPMM). The algorithm is designed for professional market makers to provide on-chain liquidity in a way that better simulates the price, spread, and depth of an order book on centralized exchanges. Learn more details about WOOFi Swap on our GitBook here.
Try it out here: https://fi.woo.org/
WOOFi Swap and DeFi 2.0
Decentralized exchanges from the era of DeFi 1.0 were forced to pay liquidity providers (LPs) a lot in fees and inflationary token rewards to incentivize and rent liquidity. As part of DeFi 2.0, WOOFi Swap eliminates these inefficiencies through bridging CeFi liquidity and hedging strategies to avoid impermanent loss for LPs. This framework equates to lower fees, with 0.1% on WOOFi Swap, compared with Uniswap V2 and similar AMM-style DEXes that typically have a standard fee of 0.3%. Users can compare the prices available on other platforms in real-time directly through the interface, which clearly displays WOOFi Swap’s execution quality.
Another principle of the DeFi 2.0 era is the rise of multi-chain solutions. As WOOFi Swap will be implemented on multiple networks, users will be able to get the same trade execution across many networks without worrying about the slippage due to imbalanced liquidity concentrations on side chains and Layer-2 networks. The ultimate vision for WOOFi Swap is that users can expect the same high level of trade execution, regardless of which chain they are using, and liquidity providers do not have to be concerned with impermanent loss. For traditional AMM DEXes, the cost of incentivizing deep liquidity on multiple networks is too high to be sustainable.
Building first on BSC
Binance Smart Chain (BSC) was chosen to initially deploy WOOFi Swap due to the rich presence of assets, users, and existing trading volume. On a technical level, the speed, low fees, and scalability make BSC a more stable environment for dAPPs and traders. In the spring of 2021, WOOFi’s original proof-of-concept pools were launched on BSC in partnership with DODO. Since then, nearly $3.7 billion in volume has passed through the pool, despite only having a few million in assets (TVL) inside the smart contracts. This leads to a remarkably capital-efficient solution that earned WOO Network entry into the Most Valuable Builder Program on BSC.
Synthetic Proactive Market Making
WOOFi Swap features a new innovation called synthetic proactive market-making, or sPMM. sPMM is an algorithm that simulates a CeFi order book by connecting to a custom on-chain market data feed. This feed pushes market data from the WOO Network order book in frequent intervals directly to the blockchain. According to recent tests, the sPMM can achieve higher capital efficiency (i.e. volume-to-liquidity ratio) than all other DEXes on the BSC market, which enables WOOFi to charge lower swap fees of only 0.1% across all pairs.
Upon launch, Kronos Research will be the first market maker for WOOFi Swap, while relying on WOO Network as the centralized liquidity source. Kronos Research is a multi-strategy trading firm that specializes in high-frequency trading (HFT), market-making, arbitrage, and CTA, averaging around $5–10 billion of daily trading volume on global cryptocurrency exchanges. The advanced hedging strategies of Kronos Research enable it to avoid impermanent loss by maintaining market neutrality continuously.
Recently, Kronos Research has been developing a renowned track record in DeFi by being the leading designated market maker on dYdX since its official launch. In both Epochs 1 and 2, they finished ahead of all other designated market makers in metrics that measure consistent uptime and quality of liquidity provided.
“Active market-making on-chain will likely be one of the biggest trends for DeFi 2.0, giving platforms more capital efficiency and reducing reliance on inflationary rewards to rent liquidity,” said Ran Yi, Head of Ecosystem at WOO Network and COO at Kronos Research. “We believe that innovations like this will help to usher in new players to the DeFi space, enriching the entire industry.”
The smart contracts were deployed in late October and will be in alpha for the first month. In the initial phase, WOOFi Swap will start with limited liquidity to accommodate smaller trades. The focus will be on optimizing the user experience and stability, monitoring the performance in the production environment before sizing up the liquidity, and adding more sources of order flows through aggregator integration. After the alpha testing period, as the product scales to more chains and assets, WOO Network may look to add more decentralized methods of sourcing liquidity. Long-term, WOOFi Swap will look to add additional analytics, support for more blockchains and assets, more utility for WOO tokens, and yield opportunities to users in the WOO Network ecosystem. The goal of WOOFi is to ultimately, along with WOO X, become a one-stop shop for liquidity spanning CeFi and all the major DeFi networks.
The smart contracts were audited by leading security experts CertiK, and a second audit is underway and results will be published soon. As an additional security measure, WOO Network announced an Alpha Bug Bounty program with a max reward of $50,000 USDT.
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