What Is OpenSwap (OSWAP)?
Oct 27, 20225 min read
What Is OpenSwap?
OpenSwap is a revolutionary project that allows users to swap tokens and provide liquidity with the best conditions. This DEX supports leading blockchain networks such as Binance Smart Chain, Ethereum, Avalanche, Polygon, and Fantom, which allows platform users to access cross-chain operations. The project team intends to build the next-generation decentralized exchange within which it will be possible to eliminate existing projects’ shortcomings. As part of OpenSwap, users can swap tokens at the best price, with zero slippage and low fees, and receive lucrative incentives and yield. In addition, developers will be able to organize fundraising for the development of their projects and ensure the sustainable health of tokens.
How Does OpenSwap Work?
OpenSwap is a multi-chain decentralized exchange functioning according to the principle of Automated Market Maker (AMM). Nevertheless, the project team focuses on solving the problems inherent in most AMMs, such as high fees, price slippage, security, sustainability, convenience, and much more. To solve the issues listed above, the founders of OpenSwap have developed a basket of DeFi products that easily interact with each other to solve various issues:
Liquidity Queue technology is a self-served development of OpenSwap aimed at providing market participants with a more effective approach to conducting transactions.
According to the project team, although the number of traders and transactions has increased since the arrival of AMMs, this approach still has drawbacks. These include such problems as impermanent loss, lack of control for market makers and liquidity providers, price slippage, high fees, and others. Tokens in liquidity pools are evaluated using an algorithm that automates price changes depending on market demand. The most common formula used by DEX AMM is x*y=k, where x and y represent unique tokens, and k remains constant. When the “x” and “y” balances change, they must be adjusted to provide a price pegged to market prices. Arbitration comes to the rescue when the price has not been adjusted within the pool. Even though this approach has worked quite effectively for a long time, it is completely unviable regarding large-volume trades due to its inherent price slippage.
The OpenSwap team analyzed this situation and proposed its solution. Instead of the usual single pricing mechanism, OpenSwap uses different pricing mechanisms for each case. To date, OpenSwap provides several queue types: Spot Price Queue (Priority Queue and Range Queue), Restricted Group Queue, and Pegged Queue.
Spot Price Queue
Spot Price Queue provides transactions at spot market prices. To ensure a tight price pegging, price oracles are used. The Spot Price Queue technology was developed for trading pairs with an established off-chain spot market price provided by oracles. However, using oracles directly is inefficient, leading to sudden price fluctuations, compromised smart contracts, and other problems. For this reason, OpenSwap implements the secure adapter protocol. The essence of the secure adapter is to use a series of breakers that provide security for liquidity providers since a transaction that does not pass the verification of any breaker will not be executed. To date, circuit breakers perform the following basic functions:
- Breakers collect prices from several oracles and exchanges to accurately reflect the market price. In case of more than 1% fluctuation, the breaker will not allow the transaction.
- The breaker does not allow an individual transaction exceeding $10,000.
- In addition to the technologies described above, the Spot Price Queue is divided into two sub-groups:
Spot Priority Queue
Spot Priority Queue is designed for traders who wish to exit the position as soon as possible and at a spot market price. The highest priority in the queue is given to traders who have deposited OSWAP tokens to the staking pool. The more tokens a trader staked, the higher his/her priority. That is, his/her order will be sold first. In addition, traders can set an expiration date for their orders, as a result of which their tokens will not be sold after the expiration of the deadline.
Spot Range Queue
This sub-group allows liquidity providers to set up price ranges according to which the supplied liquidity will be available for sale. Thus, transactions can be made only if the market price is in the range set by the liquidity provider.
Restricted Group Queue
Restricted Group Queue allows liquidity providers to provide specific tokens at a predetermined price for certain groups of users. This technology is perfect for the following use cases:
- ensuring the supply of liquidity only for a certain period;
- providing liquidity only for some specific addresses;
- limiting liquidity within a user group demonstrates that liquidity is fixed and cannot be withdrawn if there are no takers.
Due to the listed use cases, the Restriction Group Queue can be used for the following:
- private sale;
- guarantee token buyback;
- special group trading offers.
Thanks to Pegged Queue technology, users can ensure a tight price pegging of an asset to another asset. This solution is a win-win for the owners of stablecoin projects, as it allows you to swap tokens with zero slippage and fees, provides an unlimited number of token options for swapping stablecoins with, will enable them to maintain the target pegging, and ensures the stability and longevity of the project.
In addition to the listed technologies, OpenSwap has developed a novel solution that complements the existing ones — Hybrid Smart Router.
What Is Hybrid Smart Router?
Hybrid Smart Router is a smart contract set that allows traders to get the most profitable way to swap tokens. This technology works with AMM pool and Liquidity Queue smart contracts, enabling users to get the best route with minimal fees and slippage.
Open Interchain Protocol
The project team provided its solution for cross-chain swapping of chain assets — Open Interchain Protocol. This protocol supports Ethereum and Binance Smart Chain networks. In the future, the developers plan to add support for other EVM-compatible chains, primarily Polygon, Fantom, and Avalanche. Open Interchain Protocol allows users to make end-to-end cross-chain swaps transparently and efficiently. To do this, the protocol uses Single Asset Vaults on blockchains supported by OpenSwap. These vaults allow users to supply liquidity without worrying about impermanent losses. These vaults are used as 1:1 representatives of the bridge token on different chains. At the time of writing, the protocol supports leading stablecoins and tokens: USDT, DAI, BUSD, BNB, and ETH. Thus, users can seamlessly and cost-effectively bridge, for example, USDT ERC-20 to USDT BEP-20 in a ratio of 1 to 1.
The OSWAP token is an OpenSwap governance token. The token has a maximum limited supply of 1 billion, of which only 2% is in circulation. 90% of the tokens are locked, of which more than 70% will be gradually released within 24 months from the project’s launch. The token has the following use cases:
- providing various privileges and incentives to platform users;
- participation in the decision-making process;
- payment for platform services. For example, to establish Queues, users pay a fee with OSWAP tokens;
- participation in the Fixed Staking Reward program;
- participation in the Farming program.
OpenSwap is a game changer in the field of DeFi. Thanks to new technologies such as Hybrid Smart Router, Liquidity Queue, and Open Interchain Protocol, the project allows market participants to conduct transactions as profitably, quickly, and safely as possible. The developers plan to add support for other EVM-compatible chains in the future, further expanding the OpenSwap ecosystem.