Trader Joe claims to have found a way to overcome the “Impermanent Loss” barrier in DeFi
The leading DEX on Avalanche Trader Joe claims that they have found a way to mitigate one of the biggest weaknesses of the DeFi industry.
In a new whitepaper released on August 23, written by researchers and developers Quant Adam Sturges, TraderWaWa, Hanzo and software engineer Louis MeMyself. discuss the use of a Liquidity Book (LB) with a variable swap fee that adds the feature of providing traders with zero or low slippage trades
The wait is finally over… Introducing: Liquidity Book
A next gen AMM protocol that is highly efficient, flexible and built for #DeFihttps://t.co/6l2FoaJ0xo
— Trader Joe | New AMM Soon (@traderjoe_xyz) August 22, 2022
Trader Joe says the new strategy will reduce “Impermanent Loss” (IP), roughly translated as “Temporary Loss”, a problem that many suppliers liquidity level (LP) on other top DEXs suffered during the current downturn in the overall market
account @TheDeFinvestor explains by comparing IP is becoming one of the big hurdles best of Uniswap V3, because it exceeds the swap fee. On the other hand, a study conducted by Bancor (DeFi's original AMM exchange), the team revealed that up to 50% of Uniswap V3 LPs were defunct by IP.
/4 Impermanent Loss
One of the most critical issues of Uniswap V3 is that impermanent loss often exceeds swap fees.
A study effectuated by the @Bancor team showed that 50% of Uniswap V3 LPs lose money.
Liquidity Book solves this problem by introducing variable swap fees.
— The DeFi Investor (@TheDeFinvestor) August 23, 2022
Other notable values Trader Joe brings in this update are
- Trading Routers
: swaps will be rolled over to other AMM pairs when a better price is found (although this shouldn't happen often).Protocol fee - : a part of the swap fee will be kept for the protocol showing that the AMM liquidity book will solve 2 main problems: IP (unless there is a big change in price, swap fee will exceed IP index and slippage (due to liquidity arrangement in price bins).
/9 The whitepaper shows that the Liquidity Book AMM will solve 2 main problems:- Impermanent loss (unless there's a massive change in price, the swap fees will exceed impermanent loss)
-slippage (due to the arrangement of liquidity in price bins)
— The DeFi Investor (@TheDeFinvestor) August 23, 2022
Crypto Fox News summary
Aug 24, 2022
