An updated version of this article is available: Introducing the upcoming StablePlaza pool.
On January 26, 2022, a governance vote was created by a community member asking us to build a second DEX next to DefiPlaza focused purely on stable tokens.
The governance vote was accepted by our community, and Jazzer started the research into StablePlaza with the following requested features:
– A smart contract with support for (at least) 4 stable tokens (USDc, USDT, DAI, MIM)
– Zero slippage
– A 0.03% fee
– Return 0.02% to the pool and return 0.01% to DFP2 holders who choose to stake their tokens
– Staked tokens should keep their voting rights for any proposals
– If it is possible, keep the smart contract variable for number of coins in it. Over time other stables like TUSD may gain sufficient traction and we can add them into the pool easily.
At the moment of writing, the research and math are nearly done, implementation is underway and the code audit is scheduled for April 25.
Because we already get a lot of questions about what StablePlaza will look like, we’d like to explain as much as possible in this blog post. Some details might change during implementation and I’ll update this post if they do.
Table of Contents
- Fee Structure
- Concentrated Liquidity
- Staking DFP2
- Variable Token Amount
- Uniswap V2 compatible
- Capital Efficiency
- Separate App
- Timeline
Fee Structure
As requested in the governance vote, we are proposing to launch StablePlaza with a 0.03% fee, sending 0.02% to the liquidity providers and 0.01% to the total amount of DFP2 staked (more on that below).
This very low exchange fee combined with the efficient multi-token setup of DefiPlaza should make StablePlaza the DEX with the lowest possible cost and when 1inch and other aggregators implement StablePlaza it should be the de-facto place to swap stable tokens.
Concentrated Liquidity
The proposed Zero Slippage does not seem fully possible, due to the minor variances in price between the major stable tokens. Especially DAI does deviate up to 0.015 USD (1.5%) from the USD value compared to other stable tokens.
That would mean that arbitrage would regularly cause the pool of DAI to be completely emptied as they can be sold elsewhere for more if DAI would indeed rise above 1.01 USD.
As an alternative, we are looking at a concentrated liquidity setup similar to Uniswap V3 where the liquidity would be concentrated between 0.99 USD and 1.01 USD.
If the price of one of the stable tokens would rise above a 1 percent difference with respect to the others it would run out of liquidity and no longer be available to buy. It can still be sold back into the pool bringing the prices back into balance.
Staking DFP2
As said, 0.02% of every swap would go to the liquidity providers and 0.01% to the total pool of staked DFP2.
That means that users will be able to lock their DFP2 in the smart contract and earn a reward.
When a user unstakes they receive the same amount of DFP2 back, so there is no risk of impermanent loss as there is when providing liquidity against other tokens.
What makes StablePlaza special is that it is paying out the rewards to both the liquidity providers and stakers in a stable token of their choice, and not in our own token that would become inflationary.
Staked DFP2 will also retain its voting rights, in a similar way as unclaimed DFP2 rewards from DefiPlaza are available as voting power.
Variable token amount
After doing the math it turns out that having a variable amount of tokens versus a fixed amount of 4 or 8 stable tokens would have a negative impact on the gas fees as well as the complexity of the contract.
Our current belief is therefore that we should stick to 4, maybe 8, stable tokens.
We will, just like with DefiPlaza, add the ability to exchange tokens that are underperforming for new more promising stable tokens.
Uniswap v2 compatible
To make integrations with aggregators easier, we are working on making StablePlaza “Uniswap V2 compatible”, which means that the calls to swap on StablePlaza would be similar to how a contract would call the swap function on Uniswap V2 and receive a similar result.
A 1inch would therefore not need to write any custom code and “only” add the StablePlaza contract address to add StablePlaza as a swapping destination.
This makes integrating with aggregators easier and should thus increase the trade volume on StablePlaza significantly.
Capital Efficiency
Just like DefiPlaza, StablePlaza will be very capital efficient thanks to its multi-token pool setup.
With 4 stable tokens, it would only need 4 pieces of liquidity to power 6 stable token pairs. Offering a 3x higher fee reward per provided liquidity as compared to traditional pair-based DEXes. Since a traditional pair-based DEX like Uniswap would need 12 pieces of liquidity to power 6 pairs.
With 8 stable tokens, it would need 8 units of liquidity to provide 28 trading pairs. This potentially offers a 7x higher fee income when compared to pair-based DEXes, since a pair-based DEX would need 56 units of liquidity to provide the same 28 pairs.
Separate app
Since StablePlaza would feature its own swapping, liquidity, and staking functionality, we will launch StablePlaza as a separate app under the DefiPlaza brand.
This will be done by deploying the new app to stable.defiplaza.net and making it clear to the user by using a different logo and background color that the user is now using StablePlaza and not DefiPlaza.
That way we use the advantage of operating everything under one domain while separating the UI and making interacting with the two DEXes as easy as possible while at the same time reusing as much as possible of the existing UI.
How we will market the new StablePlaza DEX on our website is still up for discussion and any tips are welcome.
Timeline
We scheduled the audit by Pessimistic.io for April 25, 2022. That gives us about five weeks to finish the smart contracts and adapt the DefiPlaza App to StablePlaza.
We do believe this is possible and want to keep moving fast because StablePlaza is a huge opportunity for us and our community.
The audit will probably take a week or two and we might need to update the smart contracts based on their feedback, but we are targeting a launch in mid-May.
Since the math and engineering of StablePlaza are much more complex than DefiPlaza we are also planning to release a WhitePaper next to our usual extended Medium article upon launch, explaining all the details behind our decisions.