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AMM will become the third largest blockchain invention after Bitcoin and Ethereum



This title-ethexc will definitely cause a lot of controversy. In recent years, various new concepts have emerged one after another. However, since Ethereum and the first batch of alliance chain open source technology frameworks brought great substantive success to the blockchain industry in 2017, almost no more A new invention that is beneficial to the great stride forward of the blockchain as a whole. The stablecoin concept and its business paradigm need to be further integrated with the traditional mainstream financial world and regulatory communication to have real progressive significance; cross-chain technology has not yet formed a standard as a whole, and its own positioning for business scenarios is also constantly evolving. Various hot cycles in the blockchain industry continue to fluctuate; decentralized storage and mining still need a long way to prove that they can build a unique decentralized application scenario; the overall industry of the industrial blockchain is weakening , After running out of scene cards, there is an urgent need to update the imagination space. In the past three years, the entire industry has basically fallen into a spiral stagnation. The blockchain industry has a particularity. There is no absolute technology no-man's land, and more are blind spots. It seems that it is constantly introducing new ones and creating hot spots. However, no truly sustainable innovation and progress has been dug out of the original business or industry paradigm. How many flashes in the pan, how many "cash out", and one round per year has almost become an objective law. The biggest hot spot this year is not the halving and storage mining, but the decentralized finance (DeFi), which has been developing for three years, suddenly ushered in the industry consensus and exploded. We have seen what kind of technological progress can make DeFi exist and become more tenable in the "fancy" blockchain industry, and that is the new round of blockchain technology paradigm-decentralized financial engineering. I am willing to call it engineering, because engineering is the closest to landing, and it is also the test of endurance. In this engineering progress, the biggest innovation is the automated market maker (AMM). AMM is also the future of DeFi "revenge". The "Iron Man" with the most imaginative space and enduring vitality in the League of Investors can even boldly predict that AMM will be more "built to last" than DeFi. Bytom’s DeFi product line MOV once proposed that the entire DeFi track can be described in a three-dimensional space: the x-axis represents the transaction track, the y-axis represents the lending track, and the z-axis represents the derivatives track. Based on these three tracks, any subdivision direction can fall in this three-dimensional coordinate system, such as AMM-based perpetual contract products. If the current DeFi projects are an on-chain copy of traditional finance and learning from the experience, then AMM has achieved something that modern finance cannot achieve. The unattended all-weather trading market proves that only the district What the blockchain and smart contracts can do, and the biggest impact brought by AMM is precisely a territory that the blockchain or the currency circle has been afraid of and dare not challenge when it is mentioned over the years-centralized exchanges, bringing changed the rules of the game. The influence and contribution of Bitcoin and Ethereum to the development of the blockchain are obvious to all. For many years, people in the industry have been exploring various blockchain 3.0 to change the consensus, modify the bottom layer, and add cross-chain, but in the end we will investigate it. In essence, every progress of the blockchain should be a bottom-up progress, an enrichment and inheritance of the previous period, rather than a left-to-right progress, not to abandon the former. Ethereum's inheritance of Bitcoin has created a great innovation in the contract layer. AMM is not the only one in DeFi, but it is the only one that proves that the blockchain is irreplaceable. The most direct use is to allow people to try the preferred DEX for the first time to trade or invest and benefit, no longer relying on centralized exchanges. For other DeFi, at this stage, we can only say that it is a tribute to traditional finance. Although the blockchain is irreplaceable, it has not yet found an impact object, such as the current stable currency on the blockchain. In the third stage of blockchain development led by DeFi, AMM made people realize the deeper value of blockchain. Although it is only a form of product application at present, it is not like a public chain that can "realize all dreams". But it is still the only three inventions that have landed and produced substantial commercial progress: Bitcoin, Ethereum, and AMM. Another significance of this kind of progress is that it will not disappear and will not be as volatile as those hot spots in the past. It has found its current position and is gradually attracting other DeFi directions to build a financial interoperability system around itself. It is hard to imagine that in the past two years, AMM has completed the most difficult stage from 0 to 1 in the development process of things. After proving its significance, it is only a matter of time before it can be scaled up. The blockchain has officially entered the era of scenario-driven development. Primitive raises $9 million to build AMM discovery platform: Jinse Finance reports that DeFi infrastructure and product developer Primitive announced that it has raised $9 million in Series A funding led by Bain Capital Cryptocurrency. Other investors in the round include 1Confirmation, Nascent and Robot Ventures, according to a press release issued Thursday. Primitive was founded in 2020 by Alexander Angel to create innovative products focused on Automated Market Makers (AMMs). (the block) [2022/8/18 12:34:31] AMM 1.0 Automated market makers are commonly found in traditional financial and quantitative market-making areas. They focus on algorithms and strategies, and are an aid to manual labor. Their positioning is also similar to ours. The AMM DEX we are talking about now is still different. Those who understand traditional financial theory will know a term, the logarithmic market scoring rule LMSR (Logarithm Market Scoring Rule), which is mathematically transformed, in fact, it is the common Uniswap constant product curve. The order of traditional finance determines this purely mathematical rule. In fact, the scenarios that can be subverted are also limited, and the increasing maturity of the underlying blockchain and the blockchain people's attention to financial engineering have led to a wonderful chemical reaction between this kind of mathematics and smart contracts, which can be said to be "a match made in heaven". The development of AMMs has shown a clear evolutionary trajectory. The current hotness is the "proficiency" of AMM 1.0 represented by Uniswap, Curve, and Balancer. It is already remarkable in terms of financial risk maturity, capital scale, and user scale. It is hard to imagine that even in the crazy era of 2017, few projects attracted nearly 100,000 global users to participate, while Uniswap has reached this scale this year and continues to devour millions of users in centralized exchanges group. The amount of funds absorbed and the daily trading volume have reached the billion-dollar level, which is comparable to traditional top exchanges, and the daily trading volume may be one-fifth of OKEX. Uniswap, Curve, and Balancer, as the AMM 1.0 Three Musketeers, have basically covered most of the mainstream trading pairs market, and many new DeFi innovative capital methods and the issuance and circulation of new assets are mostly carried out based on the Three Musketeers. SushiSwap announced the upcoming launch of the next-generation AMM Trident: On October 6th, official news, SushiSwap announced that it will soon launch the next-generation AMM Trident, and is looking for users in the encryption community to test and provide feedback. [2021/10/6 20:08:20] If you want to summarize the biggest features of AMM 1.0, there are three points: (1) Based on the simplest mathematical law, simplicity is beauty. It is not too complicated in mathematics, which is also an inevitable requirement of early development, and it is a necessary condition for supporting the safe operation of the financial system. Uniswap is a typical example of constant product, and the biggest feature of this model is endless liquidity. Balancer is the weighting of the constant product, called the constant weighted geometric mean. Its current biggest use is to allow LPs to invest in two assets in proportion to the market exchange rate. Curve is the deepest application of mathematics. Its core idea is to use the mathematical rules of function curve construction to find a special curve between the constant sum (a straight line, the exchange rate never changes) and Uniswap. This curve has Strange features, it can keep the exchange rate stable within a certain range, and can maintain endless liquidity in extreme stages, avoiding exchange exhaustion, so it is very suitable for the exchange between stable assets, that is, the exchange rate of two assets is in most cases It is about 1:1. This kind of mathematical model industry is translated as CFMM, constant function market maker. In fact, I think it is more intuitive to call it "mixed constructor". At present, there are only two projects in the world that can fully realize all the mathematical and logical details of CFMM. , Curve and MOV superconducting V1 (you can go to check); (2) completely open. This is also one of the biggest reasons for the fire of AMM 1.0, making full use of the decentralization of the blockchain, just like relying on smart contracts to issue assets back then, there is no threshold, and it is simple and easy to operate, which brings great imagination; (3) Compromise with impermanence loss. We found that the most difficult thing for ordinary users to understand about AMM is not the mathematical problems behind it. Anyway, the UI is easy to use. The most difficult thing is to understand that liquidity providers will face a problem of impermanent loss. Impermanence loss is a high-level translation, which can be equivalent to "temporary loss", which is more intuitive. For example: we calculate the investment value based on the legal currency standard. Go to AMM to provide liquidity and act as AMM’s LP. After a period of time, the exchange rate between the two currencies in the market has fluctuated. The total legal currency value of withdrawing your own tokens is less than what you chose to HOLD them in your wallet until now. This is a kind of financial management concept. We all know that if Bitcoin has soared to its peak, you had a lot of Bitcoin before. The financial management strategy to maximize your income is to hold it all the time and clear it all at the moment of the highest point, but we all know this It is almost impossible, and there are very few people who can cash out at a high level, let alone this kind of maximizing income. Similarly, in the process of the continuous decline of the market, everyone is falling, but most people dare not open positions to buy bottoms. AMM is doing such a thing, and at the same time, it is also triggering the loss problem of comparing with the maximum profit. AMM 1.0 will make up for the shortfall through sufficient daily transaction volume and handling fees. Currently, Ethereum and Bytom The AMMs on the chain (similar products on other domestic public chains have not been found yet) have invested a lot of money and transaction volume to bring considerable annualized returns to LPs, and at the current stage of development of the industry, the entire market is showing very obvious fluctuations , once the market exchange rate returns to the exchange rate corresponding to when you invested the assets, your "temporary loss" will be eliminated, and the impermanent loss is only related to the market exchange rate. C.L: AMM+ technology can help solve the liquidity problem of DeFi projects on BSC: At 20:00 on April 7th, LaunchZone C.L was a guest at MXC Matcha Community to share content-ethexc related to the LaunchZone ecosystem. C.L said: "The problem with most DeFi projects released on BSC is the liquidity problem and the resulting price slippage, and LaunchZone was born to solve the problem of slippage. LaunchZone can be used in BSC's automated market maker (AMM) ) to find the best liquidity to match and execute the user's order. Its technology comes from a unique mechanism, namely Cross Liquidity Layer 2, also called AMM+. It can divide the order into multiple parts and execute them in different AMMs Each part, in order to reduce the risk of price slippage.” According to the data, LaunchZone is a decentralized trading platform-based ecosystem running on the Binance Smart Chain (BSC). At the same time, the MXC Matcha Innovation Zone was listed on BSCX on April 7. [2021/4/8 19:56:14] AMM 1.0 can be called the "mathematical AMM" stage. AMM 2.0 can be called "fund AMM". Currently there are only two representative projects, Bancor V2 and MOV Superconducting V2, and Balancer 2.0 may also be on the way. At this stage, more attention is paid not to the laws of mathematics, but to the financial benefits of LP. Just like the impermanent loss problem we just mentioned, AMM needs to expand its scale again, and the problem of LP is the first, so that LP can avoid losses and even gain investment appreciation It is a difficult problem that AMM 2.0 should focus on solving. Bancor V2 uses the oracle machine and dynamic weight adjustment mode to solve this problem, which is essentially a further constraint on the mathematical formula. MOV superconducting V2 draws on the idea of active-ethexc funds, regards LP and reserve pool as a fund product, and uses the idea of infinite grid to construct a segmented function, so that AMM's reserve pool can follow market fluctuations intelligently Adjust the positions of the two assets to achieve the effect of wealth appreciation. They also call it "active-ethexc fund type AMM". The Loopring protocol released a quarterly update, and BAMM will be launched to improve AMM capital efficiency: The Loopring protocol released a quarterly update stating that it will improve wallet applications to support wallet creation and transactions on multiple general-purpose layer 2, in the order of Offchain Labs Arbitrum, Optimism, zkSync 2.0, and StarkNet. In addition, Loopring will improve the exchange, and has completed the merger of AMM and order book liquidity for the same trading pair, which is being tested. Loopring will also develop a cross-chain bridge, so that users can transfer to Loopring through other L2 and exchanges in the future instead of going through L1. Loopring is also working with Protofire on the zkRollup blockchain explorer. Finally, Loopring will launch BAMM (Bounded Automated Market Makers, Bounded Automated Market Maker), which is to enhance the design of AMM and improve the capital efficiency of AMM with a small amount of additional implementation complexity. [2021/4/6 19:50:32] This stage has just started, and the only two representative projects have just launched their own design white papers and preliminary products.


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