Sovereign Liqudity
Democratized liquidity provision for everyone to choose price and amount to trade
Last updated
Democratized liquidity provision for everyone to choose price and amount to trade
Last updated
Uniswap V3 claims that it has resolved capital efficiency from passive liquidity where DEX liquidity evenly distribute to the price from 0 to infinity. As it brought concept of Active liquidity, where its previous passive liquidity of V2 can be disrupted. However, everyone who participated in the liquidity provision resulted net loss in reality according to Rekt report. It was only MEV bots who benefit the most by trading in active liquidity within one block. due to impermanent loss.
Impermanent loss arises when the relative prices of the tokens in the pool change. If one token's price significantly increases or decreases compared to the other token, the pool's value can deviate from the initial value of the contributed assets. This results in a situation where, if you were to withdraw your liquidity and convert your tokens back to their initial proportions, you would have fewer total assets compared to simply holding the tokens individually. MEV bots were able to notice the subtle change of prices, and provided Just-In-Time(JIT) liquidity where bots only provide liquidity for only single block and then withdraw.
This is not how AMM should behave where it automatically distributes liquidity on all prices. Rather, This is just making toxic orders where:
price can be easily manipulated by JIT liquidity bots pinpointing their wanted price with forced liquidity distribution of AMM
it provides more vulnerability of making v3 price oracles easier to manipulate with thin liquidity
polarized user experiences for liquidity providers where JIT liquidity bot owners only win
MEV bots may optimize market efficiency of AMM by close price gaps and reducing temporary distortions caused by large trades. However, this JIT liquidity bot, or sandwich bot, are also being used for stealing user's trading deposit by front-running the liquidity. A new DEX where MEV bots are utilized for its goods instead of malicious characteristics.
In conclusion, Uniswap V3 introduced active liquidity to address capital efficiency concerns, but liquidity providers experienced net losses while MEV bots benefited from impermanent loss through just-in-time (JIT) liquidity. This behavior deviated from the automatic liquidity distribution expected in an AMM and increased vulnerability to price manipulation and thin liquidity. JIT liquidity bots polarized user experiences for liquidity providers, and they were also exploited for front-running and stealing user deposits. While MEV bots optimize market efficiency, a new DEX is needed to leverage their benefits while mitigating their malicious characteristics.
Everyone deserves fair trade and disclosure to receive the right amount with what they trade with. Standard Exchange sets up liquidity which removes impermanent loss by AMMs and form sustainable markets where impermanent loss does not occur. Fees are only paid when the trade matches with buyer and seller.
Price moves does not affect any loss on liquidity providers. They just need to wait for their orders to be matched on the orderbook. This democratizes the liquidity distribution of trading prices. Front-running is not available as the price is determined by masses of orders submitted to their wanted price without forced equations like x*y=k.
Standard Exchange users are the true participants of free market economy by MEV extractors who provide fair and effective liquidity while AMMs provide command economy determined by few MEV extractors under the inconsiderate rules for trading assets with one size fits all equation(e.g. North Korea).
Orders in Standard Exchange refer to the instructions given by traders to buy or sell digital assets such as ERC20 tokens, fractionalized NFT(ERC721, ERC1155) or other bridged cryptocurrencies. These orders are executed on blockchain, all provided by on-chain to facilitate trading activities transparent and verifiable.
Here are the types of orders you would encounter in Standard Exchange:
Market Order: This is the simplest type of order where you instruct the trading platform to buy or sell an asset at the current market price. The order is executed immediately, ensuring a quick execution but without any guarantee of the exact price.
Limit Order: A limit order allows traders to set a specific price at which they are willing to buy or sell an asset. For buy orders, the limit price is set below the current market price, while for sell orders, it is set above the market price. The order will be executed only when the market reaches the specified limit price.
Make Order: A make order allows traders to pinpoint their liquidity at only one price which they are willing to buy or sell an asset. This is often used for contributing to bid-ask spread in the orderbook for market makers.
