New Tezos-based DEX “Batcher” Is Designed Without The Need For Liquidity Pools

In traditional decentralized exchanges (DEX) there needs to be a healthy liquidity pool to be able to trade.

Liquidity pools need to be filled by liquidity providers.

This can be done by anyone that is willing to provide the tokens needed for a certain trading pair, but providing liquidity comes with the risk of (im)permanent loss.  

To attract liquidity providers, an incentive needs to be provided. Liquidity providers earn a part of the trading fees, but for this to be an attractive incentive, trading volume needs to be high (low trading volume means little fees to earn for liquidity providers).

If there is low liquidity, traders can’t make high-volume and high-value trades, which means usually liquidity needs to be healthy first before large amounts of traders start using a DEX. 

To attract initial liquidity, often liquidity providers can earn extra through farming liquidity tokens.

Plenty DEX recently launched their new version which added bribes as extra incentive. 

Although many different DEXes and designs have various levels of success in achieving liquidity, the creation and sustaining of liquidity pools remains a challenge.

To bypass that issue, the newest Tezos-based DEX “Batcher” took a different approach. Batcher is designed without the need for liquidity pools. 

Batcher creates a batch for every ten minutes, in which all trades are batched and matched and executed if possible. 

“Users can deposit tokens during a deposit window; all deposits during this window will form the ‘batch’. Once the deposit window is over the ‘batch’ is ‘closed’. 

The batch remains closed until Batcher receives an oracle price for the given pair.

Receipt of the oracle price triggers the clearing of the orders and the results of swaps are stored in holdings and can be redeemed back to the user’s wallet.”

The downside of the design is that you need a counterparty (or several counterparties since trades are batched) for each trade, something that is not necessary for a DEX that does use liquidity pools. 

Batcher enables trades in $tzBTC to $USDT/ $EURL and vice-versa, these token pairs are designed to be composable with Sirius DEX: tez -(Sirius DEX)-> tzBTC -(Batcher)-> USDT/EURL.

Check out the tutorial video which explains how to place a swap order and how to redeem holdings.

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