[ Instaraise ] Building first Single Asset Liquidity Provisioning DEX on Tezos - Insta DEX

Insta DEX Overview

We at Instaraise are building a DEX with native IL Protection for liquidity Providers and Single-Asset Liquidity Provisioning

Features expected :

  • Single asset Liquidity provisioning
  • Yield Generator of Liquidity Providers.
  • IL Protection

WIth the inception of DEX we will be opening up farms for multiple LP Providers and help them gain a good amount of Rewards.

We seek to provide liquidity to small- and micro-cap coins which will be a booster for new projects to launch in the Tezos ecosystem.

The success of legacy AMMs has exposed key downsides of the initial model, affecting both traders and liquidity providers (LPs):β€Œ

  • Involuntary Token Exposure
  • Impermanent Loss

With the interests of both traders and LPs in mind, Instaraise DEX offers solutions to these problems.β€Œ

Single-Sided Liquidity

Most first-generation AMMs require LPs to contribute two tokens (e.g., INSTA and XTZ) representing the component parts of the liquidity pool. This is both an inconvenience and a liability for many LPs who may hold only one of the assets and/or are only interested in exposure to that single asset.
Insta DEX breaks this paradigm, allowing LPs to contribute and maintain 100% exposure in a single token (e.g., INSTA). As an LP, the user remains 100% exposed to the price of the token they deposited, while accruing yield from fees (paid in the token staked) and, when active, liquidity mining rewards.
LPs can provide liquidity to Insta DEX either entirely in their preferred asset or entirely in INSTA.

Impermanent Loss Insurance

Impermanent loss is a well-known side-effect of AMMs that are subject to arbitrage opportunities. When two assets are paired in a constant-product AMM (for example, with a 50:50 ratio), the product of the cardinal values of each asset reserve in the AMM is kept constant. So reserve(TKN) * reserve(INSTA) = Constant. This means that price variations lead to liquidating the asset that rises in value into the asset that drops in value.
Swap fees may offset impermanent loss; however in many cases impermanent loss can exceed swap fees earned by an LP, leading to negative returns realized by a liquidity provider upon withdrawing their tokens from the pool.
Insta DEX is designed so that a liquidity provider always gets back the same value originally deposited ( plus trading fees and rewards ) through a novel concept called Impermanent Loss Insurance.
Impermanent Loss Insurance accrues over time, by 1% each day, until 100% protection is achieved after 100 days in the pool. There is a 30-day cliff, which means that if a liquidity provider decides to withdraw their position before 30 days passes, they incur the same IL loss experienced in a normal, unprotected AMM. If an LP holds their liquidity in the pool for 100 days or more, they receive 100% compensation for any loss incurred in the first 100 days, or anytime thereafter.

If there are not sufficient tokens in the pool to fully pay out IL compensation in the staked token, part of the insurance may be paid out in an equivalent value of INSTA.

To read more, here is the Litepaper

Conclusion
We believe InstaDEX will set new standards in Tezos DeFi ecosystem through our approach and it will help the ecosystem to attract sincere DeFi crowd. IL protection is a key challenge in DeFi and we take pride in building and offer Insta DEX to the Tezos community.

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Any tentative release date for this ?

We are in the process of releasing our test-net for Tezos Ecosystem and make them aware of the tech and it’s potential. Anyone can participate in our testrun and also earn rewards for Critical Bugs.

We are trying our best to ship within a month. But also making sure our main-net release is upto the mark.

Stay Updated in our Discord Channel
You can ask all the doubts in the DEX Specific channel #instadex-queries