Trader Joe, the leading DEX on Avalanche, aims to iterate and improve upon the ideas that Uniswap V3 provided with their upcoming revamped AMM: Joe V2, Liquidity Book (LB).
On Aug 31st Trader Joe held a community AMA on the topic. Read our summary below to hear Joe team members “Fish” & “Blue” explain how they plan to implement Liquidity Book, and answer community questions.
Who Does Trader Joe’s Liquidity Book Benefit?
Liquidity Providers:
Similar to Uniswap V3
Assets currently farming are spread out over a range, most liquidity is not accruing value since most trades occur in a tight range close to the current price of the tokens being traded
More concentrated liquidity, instead of one pool there will be different “Bins”, each with a specific price range that the liquidity will be allocated to
Users can place liquidity into ranges that they think will see the most volume, and accrue more fees
Up to 4,000x greater LP efficiency than V1
Mitigates impermanent loss
Improving UX for LPs
Traders:
Cheapest rates for swaps
0.5 basis point swap fees for blue chip tokens
Up to 98% cheaper to trade USDC then Joe V1 (current slippage is 0.3%)
Same UI for traders
No slippage to very low slippage experience
If trade takes place in Bin with liquidity, 0 slippage
Cross Bin transactions will have very low slippage
Builders:
Liquidity Bins stacked vertically
Each Bin constant sum, aggregated together to form a market
LPs get fungible liquidity book token as receipt for each Bin
Tokens wrapped into fungible ERC-1155 token
This fungibility enables other protocols to build on top of Joe
Token Holders:
Liquidity Book Markets will not require $JOE emissions which reduce $JOE dilution
Markets that are closed on V1 & are opened on LB will no longer experience $JOE emissions
Portion of trading fees given to $sJOE yield
Governance for $veJOE holders, veJOE farmers (ex: vector finance)
More news to come regarding veJOE tokenomics
Volatility Accumulator:
Counts Bin steps and tallies up trades in specific market (measures volatility accurately with every trade)
Perhaps the most important innovation within Liquidity Book
Search Pricing will be used, but Liquidity Book will still provide low slippage trades for most traders
Targets arbitragers with a variable fee component
Can balance benefits between traders and LPs
Q&A
Does this enable single asset staking of liquidity for far off Bins? What happens if the price moves into the range of your Bin?
Many Bins per pool, only one active Bin has both assets, all Bins below or above active range are single sided
If range moves to a lower or higher range, the Bin will become active and won’t enable single sided staking anymore. Will trigger ‘range order’ (similar to a limit order) of the paired asset that the liquidity provider has not previously provided
EX: $USDC / $USDC.e , one could provide at the 0.95 and 1.05 ranges to trigger buys in event that both assets depeg
Do cheaper fees impact gas price? (Uniswap v3 made gas 28% more expensive)
Liquidity Book transactions are more gas intensive but still very manageable especially with size
Is there any discussion of cross chain expansion?
No. Focused on shipping Liquidity Book
Loyal to AVAX and AVAX has treated Joe well
Are there any drawbacks of LB compared to Uniswap V3?
Numbers don’t lie, Uniswap V3 is much more efficient and sees much more volume
Uniswap is the gold standard of DEXs
Joe will build upon Uniswap V3 and make it more composable
Will be releasing yield farming vault built upon it
Invite other builders to experiment with building on Joe
Could you expand on horizontal vs vertical scaling?
Liquidity more flexible then Uniswap V3
Will Projects still be able to use Joe V1? What about users? Will more Joe V1 pools be added?
LB will integrate into existing UI, just changes back end routing for traders
New Joe V1 pools will still be created, though main markets will be ported over to LB
Team still controls pool creation for LB, will be used mostly for majors rather than alts in the first version
Won’t close old pools, but will have JOE rewards stopped if team decides
Regarding the MintBot contest - read more about the MintBot contest below
Will the targeted contract be available?
Same contract used for all launchpad contracts
Contestants can run individual bots or one
Would it make more sense for protocols built on top of Joe, like Vector Finance, to acquire sJOE instead of VeJOE, if sJOE will be accruing more fees? Will sJOE become the token to hold to receive fees, and veJOE the token to hold for governance?
Details on tokenomics to come soon
Governance and voting is something the team wants to take their time with and make the right decisions on
More learning material, deep dives & resources regarding Liquidity Book and Joe will be coming soon.
Liquidity Book will be launching near the end of September.