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Matrix Market Maker

Overview

One of the core ideas behind Swaap is to limit impermanent loss by trying to be market neutral. Put differently: if you deposit 100 BTC and 100 DAI, the idea is to give you back as close as possible to 100 BTC and 100 DAI + collected fees.

Consequently, unlike traditional AMMs, the protocol doesn't need to be rebalanced in any sort to operate normaly and provide liquidity at market price.

This works thanks to two modules:

Oracle-guided pricing

Swaap totally decouples the market making from the price discovery by leveraging on-chain data from oracles such as Chainlink, removing de facto the impermanent loss.

We get an updated price everytime the latter move significantly which ensures that arbitrageurs have neutral-to-positive impact on the liquidity: no more need for perpetual and costly pools rebalancing to adjust the prices.

Stochastic spread

The MMM system embeds a stochastic spread module. Basically, the traders are quoted accordingly to the market conditions. We charge traders higher fees when the volatility is high and low fees when the market is calm.

This mechanism is here to ensure that liquidity providers are not facing what is called the inventory risk.