SakeSwap, an AMM protocol, brings trading slippage capture and a more efficient incentive mechanism. The TVL on Uniswap reached 2.14 billion US dollars, which means Uniswap has become the largest AMM DEX, updated as of 3 pm, 20 Sep.
In the past two weeks, Sushiswap took around 80% liquidity from Uniswap. It happened because of the SUSHI token which enables the Uniswap liquidity providers to farm SUSHI with their Uniswap LP tokens. They call it Yield Farming in Defi. The SUSHI token farming rules are as follows.
- Unlimited total supply of SUSHI
- Users can deposit Uniswap LP tokens to farm SUSHI which is generated 1000 SUSHI per block. And the liquidity migration executed 2 weeks later. So they airdropped 2 million SUSHI to their holders.
- The transaction fee distribution of SushiSwap, namely 0.25% goes directly to the active liquidity providers, while the remaining 0.05% gets converted back to SUSHI.
The SAKE Token
As a fork of both Uniswap and Sushiswap, SakeSwap was created to address some key issues with the aforementioned platforms. The SAKE token is the native coin on SakeSwap’s platform and has two primary functions: (1) provide users with governance rights and a portion of the fees paid to the protocol, and (2) allow liquidity providers and traders to benefit from protocol development. Early adopters of the SakeSwap platform may be able to become significant stakeholders in SakeSwap. Moreover, to maintain the token price from a structural perspective, SakeSwap will also utilize tokenomics of deflation.
The SakeSwap team believes that trade mining is necessary, because Yield Farming is not efficient enough. In addition, trade mining is also the transaction volume contributor to the SakeSwap ecosystem. Furthermore trade mining can help SakeSwap users get rewards from the swap behavior.
Unlike the SUSHI token, the total supply of the SAKE token is finite. A limited token supply avoids dilution and also helps maintain the project’s future sustainability.
Burning and Reward Distribution
SakeSwap follows the same transaction fee distribution as Sushiswap:0.25% goes directly to active liquidity providers and 0.05% converts back to SAKE. Thirty percent of that 0.05% is then burned and seventy percent of that 0.05%is distributed to SAKE token holders.
50% Slippage Capacity
In Uniswap, arbitrators acquire all the slippage, but with SakeSwap, the liquidity providers are able to capture those profits. With spatial arbitrage, the AMM will collect 50% slippage capacity from arbitrage traders. The other 50% will then be shared among the liquidity providers. So the 50% slippage capacity for liquidity providers can help enlarge an LP’s income to ~200% compared to transaction fee as income.
To incentivize trading, SakeSwap has a Slippage Token (S token). The platform supports trade mining and virtual trading curves in AMM protocol. The design of the liquidity pool ensures that traders will have a positive impact on price discovery. Moreover, the S token will be generated when trading, which helps to represent the trader’s contribution to maintaining the AMM pool balance. Holders can also start to farm SAKE token by staking S token when SakeSwap AMM pools are active.
$UNI in response to SushiSwap
Uniswap launched UNI to keep up with rival AMM SushiSwap in the fast-growing blockchain arena of Defi.
- 1 billion UNI will be released to the public over the next four years.
- A minimum of 400 UNI to anyone who had used Uniswap prior to September.
- Yield farming is targeting its USDT, USDC, DAI and wBTC pools.
- So 0.25% of the transaction fee is distributed to liquidity providers directly.
Problems with Uniswap and SushiSwap
The problems with both Uniswap and Sushiswap:
- Yield farming does not necessarily provide real value. Farmers harvest token by providing liquidity to the pool which increases the amount of liquidity in the pool. But the liquidity actually used for swap is uncertain. In other words, it’s useless.
- Uniswap used the constant-product invariant formula (x*y=k) for prediction markets. So curve developed a specific pricing function that consists of a constant product and constant sum. Furthermore, Sushiswap simply forked Uniswap without any AMM improvement.
Why SakeSwap is more Effecient
SakeSwap has a more efficient incentive mechanism compared to Uniswap and Sushiswap:
- Tokenomics of deflation
- Trading mining
- Trading slippage capture
Tokenomics of deflation & Trading Mining
SAKE Token will be distributed in LP yield farming and traders trading mining.
Phase I. Yield farming: for Liquidity Providers
- default 100 SAKE per block
- 0.5 x in the first ~5 days (35,000 blocks)
- 10 x in the next ~15 days (100,000 blocks)
- 1 x in the last ~15 days (100,000 blocks)
Phase 1 mining supply: 0.5*100*35,000 + 10*100*100,000 + 100*100,000 = 111,750,000
To make the yield farming as easy as possible for current Uniswap LP token holders, Uniswap LP token holders, as we have learned from Sushiswap, can start farming directly by staking their LP tokens into SakeSwap.
Phase II. Trading Mining: For Traders
- start when yield farming ends, ~35 days (235,000 blocks) from the start time
- default 10 SAKE per block
- 2 x in first ~30 days (200,000 blocks)
- end in ~1 year (2,400,000 blocks)
Phase 2 mining supply: 2*10*200,000 + 10*2,200,000 = 26,000,000
Traders can earn more SAKE with their S token which distributes based on each swap.
SakeSwap follows the transaction fee distribution of SushiSwap, namely 0.25% goes directly to the active liquidity providers, while they convert remaining 0.05% back to SAKE (obviously through SakeSwap). So they will burn 30 % of the remaining 0.05 % and distribute the rest of the 70 % to the SakeBar participants who deposit their SAKE to SakeBar.
With the tokenomics of deflation, SAKE can entitle liquidity providers and traders to continue earning the benefit of the protocol development, and maintain the long-term value for SakeSwap adopters.
Initial Set of Pools
- CeFi Stablecoins: USDT-ETH, USDC-ETH
- DeFi Stablecoins: USDC-USDT, DAI-ETH
- Lending Protocols: COMP-ETH, LEND-ETH
- Synthetic Assets: SNX-ETH
- Oracles: LINK-ETH, UMA-ETH
- AMM: CRV-ETH, SWE-ETH
- Layer 2: STAKE-ETH, SRM-ETH
- Rebase Protocol: GRAP-ETH, YAMv2-ETH, BASED-ETH
- Mining Aggregator: YFI-ETH, YFII-ETH, SUSHI-ETH
- Delicacy: SAKE-ETH (10x reward)
- Surprise: ❓-ETH
*New pools will be updated via GitHub.
The SAKE token will allow users to vote and make changes on the platform. Once the SAKE governance is online, SAKE holders will be able to propose changes to the SakeSwap protocol. In addition, the changes may include adding new pools, changing the SAKE weight or sunsetting a current pool.
Trading slippage capture
Instead of arbitrators acquiring all the slippage in Uniswap, liquidity providers in SakeSwap are able to capture profits otherwise given by arbitrageurs with virtual trading curves. Furthermore, in the case of spatial arbitrage, the AMM collects 50 % slippage capacity from arbitrage traders. As a result, they share the other 50 % among liquidity providers. The 50 % slippage capacity for liquidity providers can enlarge LPs’ income to ～200 % compared to transaction fees as income.
The SAKE Dev Fund’s creation is to help ensure the project’s sustainability and the security audit. For every SAKE distribution, 6% is set aside for future iterations and the implementation of governance proposals. All the bills for the security audit will also be paid by the fund.
The SakeSwap platform is definitely something to look out for especially after seeing the DeFi breakout over the summer largely generated by Uniswap. As an upgraded version of Sushiswap and Uniswap, the SakeSwap platform will allow users to earn more rewards and contribute to a growing DeFi platform. So if you would like to connect with the platform, feel free to check out the URLs below and join the community!
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Official Website: https://sakeswap.finance
SAKE Governance: https://snapshot.page/?from=singlemessage#/sake