dForce Partners With PulsarSwap
dForce Partners with PulsarSwap to Integrate TWAMM for Liquidity-swap Facility
dForce Partners With PulsarSwap. The dForce will integrate Pulsar’s TWAMM into dForce Trade to help minimize price impact for trading between DF & USX on dForce Trade. TWAMM will also play a role in DIP032.
Latest of such feature dForce Trade integrating Pulsar’s TWAMM feature to mitigate price impacts on swaps to achieve virtually minimum slippage.
AMMs work by instantaneously matching and executing orders without a third-party intermediary overseeing the process. A pricing algorithm and liquidity in the pools determine the overall price of exchange between two assets. The smart contract that governs the protocol is the only intermediary that oversees the asset swap.
Problems can arise when there a large amount of order to be place, as high impacts to execution price are likely due to lack of liquidity. dForce’s developers have been implementing different solutions, the latest of which is: TWAMM of Pulsar.
What is TWAMM and how does it work?
The TWAMM the newest kid on the blockchain when it comes to trading market maker algorithms. TWAMM, on-chain AMM model designed by Paradigm Research Partners Dave White, Dan Robinson & Uniswap founder Hayden Adams.
The TWAMM allows market participants to efficiently execute large orders on multiple blocks of Ethereum and works by breaking long-term large orders down into an infinite number of infinitely small virtual orders and executing transactions smoothly over time using an embedded AMM.
The TWAMM allows execution large batches of buy & sell orders without significantly impacting prices of the asset traded on DEXs. Pulsar combine instant swaps with term swaps to process large number of orders that split up into small virtual orders. Then, virtually crossed using an innovative, embedded AMM before they are published for on-chain settlement.
In layman’s language: TWAMM one of the most innovative features currently available in the market to minimize price impact for DEX trades utilizing AMM.
The objective of DIP032 is to create a Liquidity-Swap Facility for USX-DF. Enables the protocol to swap its protocol-minted USX for DF liquidity in the market, to inject USX liquidity via TWAP & recycle DF liquidity in the market.
This facility enables the protocol to balance out USX and DF liquidity in the market.
The strategy intended to be bidirectional (both from USX-to-DF and DF-to-USX), however, currently we only propose to activate USX-to-DF swap, & the strategy also subject to market, & liquidity conditions set forth in DIP032:
Strategy:
- Open a vault to mint USX and swap into DF via TWAP, USX to be minted is capped at 3m. Around 14% of current market value of dForce Treasury, it ensures that USX minted are always over-collateralized.
- The strategy needs to always satisfy the following conditions:
- USX/USDC peg stays within +/-1% range, the strategy will be suspended until the peg restore back to the range.
- Total USX-to-DF swap capped at 3,000,000 USX over a 3-month period, via TWAP (facilitated via Pulsarswap/Fraxswap’s TWAMM)
3. Usage of the Purchased DF
- stake into DF free/lockup staking;
- protocol to provide DF/USX liquidity in DEX to boost DF’s liquidity.
- to enable a future reverse swap (i.e DF-to-USX twap) to combat excessive USX liquidity, subject to governance approval.
This process will help strengthen the feedback loops between USX & DF tokens, i.e., more USX adoption will bring more protocol income, more income to recycle DF, etc.
The liquidity-swap facility utilized to build a stronger and positive feedback loop between USX and DF token. 1) funnel DF trading volume into USX liquidity. 2) balance out DF and USX liquidity in the market. In a bear market, with excessive DF liquidity, the facility enables conversion of more DF liquidity into debt-like USX liquidity to stabilize the supply & demand & vice versa.
About dForce
dForce advocates for building a complete set of DeFi protocols covering assets, lending, trading, serving as DeFi infrastructure in Web 3. dForce currently deployed on Ethereum, Arbitrum, Optimism, & BSC.
About Pulsar Protocol
Pulsar Procotol the implementation of TWAMM that effectively combines embedded AMM, Instant Swap, and, most importantly Term Swap that breaks long-term orders down into an infinite number of infinitely small virtual orders and executes swaps smoothly over time using an embedded AMM. The outcome is hence the avoidance of high slippage costs and gas fees. It is the AMM and on-chain version of TWAP. After two rounds of contract audits by Peckshield and Secure3, Pulsar is now live on the Ethereum mainnet and Goerli testnet.
