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ENG
WOOFi (DeFi)
WOO DAO
📈
Swap
What is WOOFi Swap?
Swap is the main function of WOOFi, and it is a decentralized exchange using a brand new on-chain market making algorithm called Synthetic Proactive Market Making (sPMM). The sPMM algorithm is designed for professional market makers to provide on-chain liquidity in a way that better simulates the price, spread and depth of the order book on centralized exchanges. According to recent tests, WOOFi's sPMM liquidity pool can achieve over 300% capital efficiency (i.e. volume-to-liquidity ratio) which is higher than all other DEXes on the market, and it enables the lowest swap fees (i.e. 0.025%) in the space. Upon launch, Kronos Research will be the first market maker for WOOFi, while relying on Wootrade as the centralized liquidity source.
How does WOOFi improve trade execution?
WOOFi offers high-quality trade execution on par with centralized exchanges across various blockchains with just a fraction of the TVL of AMMs. This is particularly useful on the blockchains that have thinner liquidity on major assets than Ethereum mainnet, as users do not need to pay exorbitant fees and suffer high slippage.
When a user selects the token for both ends of the swap as well as the amount of the token to be swapped from, WOOFi compares the result of execution with other popular DEXes on the same chain, including details such as the number of tokens to be received, trading fee and exchange rate.
WOOFi prioritizes quotes from its own sPMM liquidity pool, which generates fees for the protocol. However, in the case that sPMM liquidity can not support the swap it will be routed to 3rd party DEX aggregators to ensure users always get the best trade execution.
You can tell whether the swap will be executed via WOOFi's own sPMM liquidity or 3rd party DEX aggregator from the "trading fee" on the UI.
- sPMM liquidity: 0.025% (in blue fonts)
- 3rd party DEX aggregator: depends on the liquidity venue
Will my trades on WOOFi be "sandwiched"?
Sandwich attack is one of the main concerns for large DeFi traders, and it's very common in AMMs. The price in AMMs is determined by the token balances in the liquidity pool, the exploiter sniffs out the pending transactions on the network and front-runs the victim's trade to push the price up. The victim buys at a higher price of asset Y, then the attacker sells at a higher price. As a result, it causes loss for the victim.
In WOOFi, the price is determined by the parameters of on-chain price feeds and sPMM algorithm instead of the liquidity in the pool. The price is updated on-chain at a ~0.1% price deviation. Therefore, the exploiter will not be able to artificially push the price up to front-run other users.
How does WOOFi achieve high capital efficiency?
Because WOOFi simulates the depth of the order book from the centralized liquidity source, it is able to outperform AMMs in the execution of the same trade size with a fraction of the TVL. This allows WOOFi to achieve a much higher volume-to-liquidity ratio i.e. capital efficiency.
In addition, instead of having an asset pool for each trading pair, WOOFi uses a single pool design that holds and manages all the assets including multiple base tokens and one quote token. The sPMM auto rebalances the assets in the pool by providing more favorable quotes to traders who send assets that are low in liquidity to the pool. This design further improves the volume-to-liquidity ratio and saves on gas fees for users.
Last modified 1mo ago