Quipuswap V3 Launched And Introduces Uniswap V3 Features

Quipuswap V3

Quipuswap has been the most popular DEX on Tezos since it launched in March 2021.

Since then Quipuswap has continued to evolve and add features.

Now, Quipuswap v3 launched and added features that have proven to be a success on Ethereum’s #1 DEX Uniswap v3.

The most important changes are changes in the way you provide liquidity and earn fees. 

Concentrated Liquidity

The first feature is Concentrated Liquidity. In traditional DEX design, you’d provide liquidity for a certain pair and your provided liquidity would be active until you remove your share.

With the concentrated liquidity feature, you specify in which price range your liquidity is active.

So, if you’d provide liquidity on the XTZ/USDT pool, you can specify that your share is only active in the XTZ price range of $0.8-$1.3.

This way you can limit your exposure to the effects of impermanent loss. But most of all, if you pick the right price range, while others choose differently, your share in the active liquidity pool is bigger and you’ll earn more fees.

Active Liquidity

Another feature is Active Liquidity. This means that once the price moves out of your selected price range, your share is automatically converted to the cheapest asset and returned to the liquidity provider. 

Example:

Bob added liquidity to the TEZ/USDT pool and set up a TEZ price range between $0.9-1.15 by using the Active liquidity feature.

If the TEZ price becomes less than $0.9 – all liquidity automatically converts to TEZ. If the TEZ price increases and becomes more than $1.15 – all of Bob’s liquidity converts to USDT.

Flexible fees

Quipuswap v3 also introduces flexible fees. This means that you can choose the height of the fee when you set up a liquidity pool.

This is interesting for trading pairs that are not very popular and therefore have fewer transactions. Normally this would result in the fact that liquidity providers earn less in fees.

However, if the fee in such a pool is set to 1% instead of 0.3%, the high fees compensate for the low amount of trades that are made in that pool. That way it could still be interesting to provide liquidity to such a pool. 

No traditional LP tokens

Due to the fact that in Quipuswap v3, liquidity is provided through the concentrated liquidity feature, it is not possible to use standard LP tokens.

This is because each liquidity provider does provide liquidity under its own customized set of conditions, and each liquidity provider receives a unique non-fungible token. Thus an NFT. (No, not the jpeg one..) You can’t use these in the current farming pools, so you’d only earn through trading fees. 

Advanced oracles

If prices move out of popular price ranges at times of high volatility in the market, liquidity could drop significantly. This means that in traditional DEXes, prices are easier to manipulate. Quipuswap v3 prevents that with a new design of price oracles: TWAP Oracles. 

“A price oracle is a tool that allows getting price information about any given asset from the QuipuSwap DEX and using this data in the smart contracts of other DeFi protocols on Tezos. For this reason, we built decentralized and manipulation-resistant on-chain price oracles – time-weighted geometric mean (TWAP) oracles. 

The accumulator at any given time is equal to the sum of 𝑙𝑜𝑔1.0001 (𝑃) for every second in the history of the contract. 

This delay allows arbitrageurs to equalize the price and bring it in line with market conditions, and, as a consequence, TWAP should always be close to the market price.” 

You can read more about how to use Quipuswap here.  

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