Swaap is the first ever stochastic AMM, specifically designed to passively provide sustainable yields on arbitrary assets.
Swaap takes value from arbitrageurs and redistributes it to traders and LPs, by introducing a stochastic-based approach to compute the price of the assets.
This allows us to serve both LPs and traders better:
- Liquidity providers get native impermanent loss protection
- Traders are able to get lower fees on average than other AMMs thanks to a dynamic spread approach
Why do we need such solution?
We created Swaap because we feel that AMMs are intrinsically broken.
We love AMMs. It’s completely permissionless, you can trade 24/7 and everybody can earn yield on their assets, by becoming a liquidity provider.
But the truth is, AMMs are a broken product. Their design is too simplistic, so both LPs and traders are losing money.
- Impermanent Loss is costing LPs billions of dollars per year. ~50% of LPs on Uniswap v3 are losing money compared to a HODL strategy.
- Trading fees are in most cases, higher than centralized exchanges. They need to compensate for impermanent loss. Slippage is high, since many people don’t provide liquidity due to IL.
In the middle, arbitrageurs extract a lot of value from LPs and traders by adjusting AMMs prices based on other trading venues' prices.
Well, we need something better!
With Swaap, we are not just building an AMM model sustainable for both LPs and traders. We are creating a new class of asset: HODL that passively collects fees from market making.
We are strong believers of passive investments, because they enable investors with little knowledge of the market to gain yield on their assets.
Actually, we are creating an asset class that allows all investors to collect fees on their assets without needing to dedicate time or to have expertise.
That is why our protocol allows users to build pools of more than two tokens. This will allow users to basically create ETFs that collect fees, a fully passive investment product.
Our protocol will be the backbone of passive investments onchain.