A centralized exchange manages security policies, exchange data, and validation on its own internal servers. A decentralized exchange, on the other hand, has no middleman to handle your private keys. All trades and transactions happen through your own wallet with express permission using smart contracts. Read our article detailing key considerations in choosing a DEX here.
A liquidity pool is a collection of funds locked in a smart contract. In Polkaswap every trading pair has 2 pools, one for each token: users called liquidity providers (LP) add an equal value of two tokens into a pool. In exchange for providing funds, liquidity providers earn trading fees from the trades that happen in their pool, proportional to their share of the total liquidity.
Liquidity providers can be anyone who is able to supply equal values of XOR and another token to a Polkaswap pair contract. In return, they are given tokens from the exchange contract which can be used to withdraw their proportion of the liquidity pool at any time. Whenever someone trades on Polkaswap, the trader pays a 0.3% fee in XOR which is instantly burned. Once a day, a % of the burned PSWAP is re-minted and distributed to liquidity providers. This percentage starts at 90% and goes down to 35% linearly over the course of 5 years.
Liquidity pools on Polkaswap work much like other DEXs. Fees are paid in XOR; they are automatically converted in PSWAP and then burned. A percentage of the burned amount is then re-minted and given to liquidity providers. PSWAP rewards start at launch at 100% of burned tokens and go to 35% over the course of five years.
Polkaswap has worked to resolve some of the issues with Ethereum based DEXs. Built on Substrate, Polkaswap offers lower transaction costs and faster transactions. Polkaswap also offers swaps across Ethereum, Polkadot and Kusama networks, and more bridges are in development, like the upcoming Bitcoin bridge. In addition, with its liquidity aggregation technology, Polkaswap will allow trades against multiple liquidity sources under a custom liquidity aggregation algorithm. The liquidity aggregator algorithm can aggregate liquidity from various sources. Liquidity sources can be in the form of AMM DEXs, order books, or any other algorithm. Ultimately, this helps ensure users find the best value for their swaps.
When clicking on Swap on the menu bar you can choose between XYK, TBC and SMART functions on Polkaswap, as shown in the picture below.
Using XYK option you will trade with Polkaswap pools, as you usually do in Uniswap and other AMM DEXs
Using TBC your trade will be executed in the token bonding curve. The SORA token bonding curve acts as the decentralized, on-chain manager of the XOR token. It works by taking in reserve assets and minting new XOR, or conversely, de-minting XOR and releasing reserve assets. This solution often reduces slippage for large trades, as the token bonding curve increases the liquidity of the XOR token. In addition, there is a special incentive when a user buys newly minted XOR in the token bonding curve; rewards are in PSWAP. You can read the full article about this reward here.
Prices on the token bonding curve and in XYK pools may be different, in which case you can use the SMART function to trade at the best possible price. Note that the SMART function does not consider PSWAP rewards in its calculations.
For every trade on Polkaswap there is a 0.3% fee to be paid in XOR. You do not need to hold XOR to make trades. Polkaswap can subtract fees from the trade itself. Fees are immediately converted in PSWAP and then burned. After that, a certain % of the burned amounts is reminted and distributed to liquidity providers, the Parliament and as a strategic bonus vesting to users.
You can learn more about the liquidity providers reward here and about the strategic bonus vesting in "PSWAP Bonus Rewards" section of the Wiki.
Soft launch supports only limited functionality (Ethereum network bridge, swap between SORA substrate and Ethereum type tokens, providing liquidity).
Full launch means DOT and KSM will be added to Polkaswap.
Asset ID (address) is a unique asset identifier on SORA network (like contract address in Ethereum).
No. Users can trade on Polkaswap without having XOR; fees will be subtracted from the receiving amount. This only works when swapping to XOR.
If you don't see a specific token in the Account section on Polkaswap, click on "Add Token" and write the name, the ticket, or its address
Yes, there is an incentive program that will reward liquidity providers on Polkaswap for the next 4 years. About 2.5M PSWAP are allocated daily, and after a vesting period, liquidity providers will be able to claim their PSWAP. You can learn more here
The Polkaswap protocol smart contract, designed with security as its top priority, has been audited. However, we cannot guarantee that bugs will not be found in the future. Please do your own research, and always be careful and perform due diligence when trading on Polkaswap. The biggest risk when providing liquidity on Polkaswap is known as impermanent loss.
Impermanent loss happens when the prices of the token that was deposited into the pool has changed from the price it entered at. The bigger this difference is between the entry price and the current price, the more exposure liquidity providers are to the risks of impermanent loss. Let's see an example on how it works:
You're providing liquidity to XOR-DAI pair. At the time you enter the pool, 1 XOR = 100 DAI and so you provide to the pool 1 XOR and 100 DAI. Polkaswap requires that the two deposited assets maintain a 1:1 ratio. Now imagine that the total pool contains 10 XOR and 1000 DAI, which is worth $2000. This means you have a 10% share of the pool.
If the price of 1 XOR reaches 400 DAI, in order to maintain the balance of a 1:1 ratio, the total pool would then become 5 XOR and 2000 DAI, according to the x*y=k formula. If you decide to withdraw funds during this time, you would still withdraw 10% of the pool as that is your share, of which 0.5 XOR and 200 DAI (10% of the pool) is withdrawn, which equals $400 (excluding trading fees).
But if you would have held 1 XOR and 100 DAI instead of depositing into a pool, you'd have $500 worth of assets rather than withdrawing $400. This is what we call impermanent loss.
A video explanation that goes further into detail can be viewed here.
Keep in mind that the impermanent loss effects are mitigated by the 0.3% fees paid on each trade and by the first strategic program.
There are 3 main ways to earn PSWAP:
Liquidity pools in Polkaswap work much like other DEXs. Fees are paid in XOR; they are automatically converted in PSWAP and then burned. A percentage of the burned amount is then re-minted and given to liquidity providers.
The first way to earn PSWAP tokens is to be one of the liquidity providers on Polkaswap after launch About 25,000 PSWAP will be allocated daily to liquidity providers on Polkaswap, and after a vesting period, users will be able to claim them. To read the full article on the first incentive program, have a look here.
The second way to earn PSWAP is to buy XOR with ETH, DAI, DOT, or KSM from the token bonding curve. Buying XOR with ETH, DAI, DOT, or KSM would help grow the SORA ecosystem, collateralize the bonding curve, and in the case of DOT and KSM, help SORA secure parachain slots for the Polkadot and Kusama chains respectively. 2.5 billion PSWAP tokens have been allocated as rewards for XOR buyers. If you’re interested in the math behind the token bonding curve, read the details here.
The third way to earn PSWAP tokens is from market making rebates on Polkaswap. 4 million PSWAP (200,000 per month) will be reserved proportionally for market makers that have at least 500,000 transactions with an average of at least 1 XOR in each transaction. You can read the details here.
Those contracts have no owner, so all the funds sent there are lost forever
No - you don’t. However, Fearless Wallet is built for seamless integration with Polkaswap. Fearless Wallet is a mobile app for Kusama and Polkadot networks, with native support on iOS and Android platforms. Learn more here.
Substrate is a framework for creating cryptocurrencies and other decentralized systems. Polkadot is built with Substrate and so projects built with Substrate can run natively on Polkadot. Polkaswap is built using Substrate.
It is possible to support Polkaswap by buying XOR with DOT and KSM from the token bonding curve. By doing so, you'll increase the reserves of the token bonding curve, that will be used to make a bid in the auctions. Furthermore, there is a special reward in PSWAP when buying with DOT and KSM, this reward is higher when there are few reserves, and will decrease as they accumulate. You can read the full article about the incentive program here.