Smart Pools are an advanced DeFi technology employed by Vegaswap to meet the dynamic demands of the DEX user experience. The feature is among the most crucial on our DEX as most of our core services are best experienced through our Smart Pools. This article takes a deep dive into Vegaswap Smart Pools, explaining what they are, how they work, and how they benefit the Vegaswap ecosystem.
Vegaswap Smart Pools — What are they?
Smart Pools aim to redefine the benchmarks for liquidity pools by offering more services and features to meet market demands.
The market is divided into two distinct sides based on the need of users in liquidity pools. A section of users in these pools seeks to swap one asset into another — market takers. The other section of participants provides capital in tokens to the pool to gain some revenue following their liquidity provision — market makers.
Thus, Smart Pools allow both sides of the market to conduct their business in the most innovative way possible by providing advanced DeFi technology.
How do they work?
Smart Pools on Vegaswap are designed to maintain and propagate the platform’s ethos, which is based on the Vega derivative for pricing. In line with supporting the founding principles of Vegaswap, the following are possible via Smart Pools:
1. Different Pool types
With DeFi, there is no one size fits all solution for pools. Different tokens are in diverse stages of development; therefore, they need different pools to co-exist in the market favorably. Through Vegaswap, users create their unique pools, which can act as asset issuance pools or market-making pools based on the user’s preference.
Market-making pools are different from regular liquidity pools as there are human agents required for the success of the operations. However, they operate in a similar way to hedge funds, with profit and loss calculations periodically needed to gauge the pool’s success.
Asset issuance pools deal with highly volatile tokens. Consequently, their trading requirements are unique owing to their volatility. Smart Pools allow pool creators to define the parameters under which the volatile tokens are to be traded. The feature is vital for digital assets that are just entering the market. It gives them a chance to be traded fairly, without the extreme prejudice of volatility that typical markets ascribe them.
2. Quick custom pool creation
As previously described, there are various pool options to choose from and create on Vegaswap. This is made quite efficient through the 1-click to create a custom pool feature.
3. Custom pricing function
The fees in Vegaswap Smart pools reflect market conditions with the price option Vega given priority. Various factors are considered, including volatility and volume, to determine the fees charged for multiple transactions in the Smart Pools.
Still, on pricing, the routing function on Vegaswap enables better price discovery for users depending on which pools have the best liquidity in the ecosystem.
4. Robust tools for pool owners for more control
Pool owners have potent tools to customize their Smart Pool experience to gain optimum profits from pool activities. One of the customizations is a cap of liquidity and tradeable shares. This means that the amount of capital added to a pool is limited, ensuring that the share of a pool gains a significant value because the shares are scarce.
Proof of liquidity is another tool that pool users can utilize to prevent rug pulls. The shares in a pool are locked over a specified period. During that period, users of the pool will know that liquidity is available.
Smart pools can also integrate Escrow features made possible by Vegaswap’s advanced marketplace smart contracts. For example, capital raised in the smart pools can be released slowly based on set milestones or parameters.
Vegaswap also provides insurance in case there is a default event of a token. This happens when the price of a stablecoin falls below $1. Thus, it is helpful for investors to try and maintain or improve the value of their investment in Smart Pools.
5. Launchpool to help bootstrap projects
Securing the future of a project is quite difficult without the right tools. On Vegaswap, specific measures are put in place to give projects some advantage in Smart Pools. For instance, Vegaswap has options on launches feature where derivatives are created for a token launch event to increase the token’s overall desirability.
A previously mentioned feature that aids the progress of projects is the creation of different pool types, which allows new tokens to be traded fairly in Smart Pools that consider their unique market position.
What to expect in the future?
Expectations from Vegaswap depend on the position a user is targeting in the market. For example, market makers have the chance to improve their cryptocurrency holdings by providing capital in Vegaswap. In contrast, market takers should expect liquidity from the platform to invigorate their cryptocurrency activities.
Vegaswap is a user-centered automatic market maker that leverages multichain technology, providing users with a wide range of DeFi and cross-chain applications through its platform. It supports and enables seamless token earnings through customizable liquidity pools, dynamic pricing, and an intuitive UI. Vegaswap makes the work of LP providers efficient and profitable by creating provisions for unique smart pools, providing analytics tools, and reducing impermanent loss with adaptive spread.
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