This update first appeared on the official Defi Raccoons Medium channel and has been republished unaltered.
Date: 18th of November
Host: Angle
Guest: DefiPlaza ( Jazzer — Main Dev )
Hello Raccoon Nation and DeFi Enthusiasts!
We recently hosted an AMA with DefiPlaza. So here we are up with the AMA transcript, for those who missed the live session, this post will be a time saver for everyone.
INTRODUCTORY QUESTIONS
DeFi Raccoons: Hello everybody, thank you for joining us today for another edition of DeFi Raccoons AMA session! Grab a seat and get ready to learn. Today we’ll be talking with Jazzer, the main dev of DefiPlaza. DefiPlaza is the lowest cost Decentralized Exchange (DEX) on Ethereum layer-1. Why don’t you tell us a bit about yourself, Jazzer? What kind of background do you have and what is your main work in DefiPlaza?
Jazzer: Hi everyone, nice to meet you all!
I’m Jazzer, an electrical engineer by education. I’ve been involved with crypto as a hobby since 2013, my favorite projects are Bitcoin, Ethereum and Radix. In April I saw an opportunity to build something new on Ethereum and started development on DefiPlaza. We now work with a core team of 3 devs and another 9 volunteers to help with marketing and community building.
My role as a dev is to build and maintain the smart contracts, and in my role as founder I’m writing about DefiPlaza and connecting with many other projects to discuss collaborations and integrations. And do AMA’s and those kind of things. 🙂
DeFi Raccoons: We’re glad to have you on for this AMA for sure. Can you describe a bit about what DefiPlaza is and your main goals for building it? What kind of problems are you trying to solve?
Jazzer: In the summer of 2020 someone introduced me to DeFi and it’s been quite the journey. I remember vividly discovering what an LP token is and how UniSwap works and that was quite the rabbit hole. I joined all the yield farms, was amazed by the opportunities.
Then I started digging into how these things actually work. UniSwap is so elegantly designed and so flexible, It was one of the most ingenious things I had ever seen. But as time went on and the ETH price went up together with the congestion on the network, it also became soooo expensive to use it. Which was a real bummer since there are so many interesting projects and opportunities on Ethereum.
Despite the high costs, Ethereum is still where most of the liquidity is, and where many interesting new projects and innovation is taking place. Then, in March I discovered a single contract exchange that would on some swaps be cheaper than UniSwap, which I didn’t even realize was possible before that moment. That really put me to think about exchange economics.
There were some things I didn’t like about that other exchange, and the team wasn’t about to make any changes. So then I decided to just start my own project and started development on DefiPlaza.
The mission of DefiPlaza is to make DeFi on Ethereum affordable again. I didn’t want to go to a side chain as the bulk of the liquidity is still on Ethereum. So I asked myself the question how much gas is fundamentally required to do a swap. What is the absolute minimum number of operations involved to make two tokens switch owners. And then I started building from there. When I was done, it turned out that typical swaps are 50–65% cheaper on DefiPlaza than on UniSwap.
DeFi Raccoons: So would you say you have achieved this goal already?
Jazzer: Well, let’s say that affordable is a relative term.. It’s still Ethereum. But I’m confident that this is as inexpensive as it can possibly get, so this is what it’ll have to be. And I’m quite happy with the result, 50–65% is quite a significant amount.
DeFi Raccoons: Yea that’s quite the reduction. I’m tired of paying $100 just to make a swap on UniSwap for sure
You’ve already touched on this a bit but what makes Plaza stand out from the competitors like UniSwap and SushiSwap? Just the fees?
Jazzer: Yeah, at DefiPlaza at least you get to make 2 swaps for that amount. 🙂
The gas cost and the transaction fees. We charge only 0.1% on each swap, where 0.3% is the industry standard. And as discussed, the gas costs are typically 50–65% less as well. So it’s overall just a much better deal for exactly the same product: a swap of two tokens.
The same philosophy is also applied to adding/removing liquidity and staking transactions. They are significantly cheaper to execute than with other DeFi projects, so the unique selling point is indeed that we’re low-cost.
DeFi Raccoons: Ahh so lower swap fees on top of low gas that’s amazing
Could you tell us a bit about behind the scenes? How do you technically achieve the low fees, LP, etc
Jazzer: Sure, from a technical point of view there are a few different ways that help us create low gas transactions:
1. We don’t use a router, everything is implemented in a single exchange contract so no external contract calls.
2. We don’t use WETH (wrapped ETH), just plain ETH so no wrapping and unwrapping.
3. Hard coding to 16 listed tokens allowing numerical optimizations.
4. We group several variables together in structs to do absolute minimum of blockchain read/writes.
By using 16 tokens in 1 exchange, that can all be swapped against each other, we create 120 unique trading pairs, many of which can’t be found elsewhere. You can trade SPELL directly against DAI if you want, no hops from SPELL to ETH to DAI minimizing gas.
DeFi Raccoons: So I was a little confused when researching — how do those 16 tokens interact? Are they all in one pool?
Jazzer: Yes, they’re all in one pool. But each swap only happens between 2 tokens, the other 14 aren’t required at that time. But it gives great flexibility, because like I said above, with 16 units of liquidity you generate 120 trading pairs. Whereas in a pair-based exchange you can only realize 8 trading pairs with the same amount of liquidity. So apart from having lower gas consumption, it’s also a much more efficient allocation of capital.
DeFi Raccoons: So when depositing to the pool, what exactly do you need? usually its 50% token 1 and 50% token 2 — does it differ from that?
Jazzer: If you extrapolate the same mechanism to a 16 token pool, you’d need to add all 16 tokens, 6.25% each. That is possible to do in DefiPlaza but it is quite cumbersome as you need to gather 16 tokens first which is quite expensive especially if you don’t have a very large stack to begin with. So we’ve built a convenience function that allows you to add single-sided liquidity. Mathematically it pretends you added all 16 and then swapped 15 of those into the token that you actually added. Luckily, the resulting calculations can be implemented very efficiently such that single-sided liquidity add is also very gas efficient.
DeFi Raccoons: Ahh ok so single sided is great. I didn’t expect having to add 15 tokens but this is good to know.
So is there something like impermanent loss that has to be dealt with? How does that work with the single token add?
Jazzer: Normally we discuss impermanent loss as something you’re exposed to over time. It assumes a comparison between holding all 16 tokens and holding the liquidity token. It doesn’t really apply to a single token versus the pool. When you do a single token add, you can view it as selling that token for the basket of all 16 tokens. Your original token is no longer yours, it has become part of the pool.
Say you add ETH, you’ll get XDP2. After a month you withdraw back into ETH. Then you’ll get more ETH than you started with if the basket of tokens outperformed ETH, and less if the basket underperformed ETH. So if you believe that your token will outperform the market, it’s not smart to add it to a liquidity pool. Regardless of whether it has 2 or 16 tokens in there.
In DefiPlaza, the impermanent loss is spread across all 16 tokens, which means that so long as the crypto tokens that are listed are moving up and down in price together, your impermanent loss will be much reduced. Historically, crypto markets have shown very strong correlation in price across different projects. If bitcoin goes up, everything else goes up with it. If bitcoin goes down, everything goes down as well.
Having a basket of high quality project tokens makes that we are less exposed to IL since these are expected to move up and down in a correlated manner. Also, listing 16 tokens means that if a single token has a dramatic performance, this doesn’t immediately drag down the whole index. For instance, if one token loses 80% of the price compared to the other tokens the resulting IL is 4.8%. Not nice, but also not the end of the world when we’re talking about crypto.
DeFi Raccoons: So when depositing to the pool, what exactly do you need? usually its 50% token 1 and 50% token 2 — does it differ from that?
Jazzer: If you extrapolate the same mechanism to a 16 token pool, you’d need to add all 16 tokens, 6.25% each. That is possible to do in DefiPlaza but it is quite cumbersome as you need to gather 16 tokens first which is quite expensive especially if you don’t have a very large stack to begin with. So we’ve built a convenience function that allows you to add single-sided liquidity. Mathematically it pretends you added all 16 and then swapped 15 of those into the token that you actually added. Luckily, the resulting calculations can be implemented very efficiently such that single-sided liquidity add is also very gas efficient.
DeFi Raccoons: I didn’t expect to have to add 16 tokens but this is good to know. I always say that adding liquidity to a pool is a really good thing to do in times of crab market. But that’s really cool that its based on the basket outperforming the asset added.
So since you mentioned XDP2, let’s talk about your 2 tokens (DFP2 & XDP2). What are their functions and how do the tokenomics work to accrue and maintain value? What’s the marketcap? I couldn’t find it when i was looking at the token info.
Jazzer: XDP2 is the liquidity token. If you add liquidity to the exchange (which can be done in any of the listed tokens) you receive XDP2 in return. This reflects your share in the total liquidity on the DEX, spread across all 16 tokens. It acquires value over time because it collects a small fee (0.1%) on every trade done at DefiPlaza, and it goes up and down with the value of the underlying tokens.
DFP2 is the governance token. It can be used to vote on important matters around the strategy of the DEX. The first vote was carried out last week, when the community voted to replace AAVE with SPELL as listed token. The DFP2 token is listed at our exchange (so you can buy it cheaply 😉) and has a hard capped supply that is released over the course of 1 year. We started October 6th, so still very early. One nice mechanic is that if exchange liquidity goes up, DFP2 price automatically rises with it if no additional tokens are added.
Current marketcap of DefiPlaza can be found at https://defiplaza.net/stats/ and is around $12.5 million. We’re also listed at CMC/CG/Nomics/DEXTtools etc…
DeFi Raccoons: Since you mentioned the LP token, can you talk a bit about the mechanics of liquidity mining in Defi Plaza?
Jazzer: As mentioned you can add liquidity in any of the listed tokens and get XDP2 in return. You will receive the best bang for the buck (relatively more XDP2) if you add the token which is the most underrepresented in value on the DEX. At the same https://defiplaza.net/stats page you can find a list of tokens currently held by the DEX.
If you wish to add more than 10k$, it’s best to split the amount in 2 and add to the bottom 2 tokens, if more than 20k$ it’s best to split the amount in 3 parts and add to the bottom 3 and so on. If you want to add more than 160k$ you can best use the addMultiple feature discussed before. This has the advantage it doesn’t have any slippage, but it’s a bit cumbersome to use as you need to collect all 16 tokens in the right amounts.
Once you have added liquidity and received your XDP2, you can stake these tokens in the staking tab. In keeping with the design philosophy of the DEX, transactions for adding liquidity and (un)staking take the lowest gas cost on Ethereum DEXes anywhere. Staking APR is currently 841% and has been above 500% since the rewards started at October 6th. This is quite significant IMO as it indicates that very few people are willing to actually sell their rewards on the DEX. Staking is so cheap and convenient that ±99% of the liquidity tokens are staked.
DeFi Raccoons: That’s some pretty insane APR!
How much liquidity/TVL do you have on your platform currently? Do you have a goal for this number and how do you intend to reach it? Since you’re throwing out some numbers there and how to add them. That’s really helpful strategy discussion for the community- thank you.
Jazzer: We have a bit over 6M$ in liquidity at the moment. This means we are now the cheapest option for pretty much all trades up to 5 k$ or so in trade value. For trades larger than 10 k$, the slippage may get too big to still make us the best option for large trades. We aim to increase the liquidity to values where we are the cheapest option for the vast majority of trades on DeFi. Somewhere around the 50–100M liquidity dimension should put us in a good spot for that.
Everything is already in place, the product is done and the savings are real. We just need to get the word out. Once you’ve tried swapping at DefiPlaza you’ll never swap anywhere else, it feels just like flushing money down the toilet to use UniSwap once you’re used to DefiPlaza.
One important objective is for us to get integrated into DEX aggregators, such that the volume on the DEX can increase to a point where even by fees alone it makes an attractive value proposition to supply liquidity and we can sustain the DEX liquidity after the liquidity rewards phase out. We made a huge step in this direction by getting integrated into 1Inch earlier this week. Volume has already exploded with that integration, even though we are still working on some technical issues with it.
We’re on our way to another ATH trading volume today, looks like we’ll top 1.5M before the day is done.
DeFi Raccoons: Wow that insane! I’m sure the LPs are very happy with that uptick. Congratz if you reach ATH!
Jazzer: Swapping directly at DefiPlaza is much cheaper than via 1Inch still. 😉
Thanks! It’s been a great week.
DeFi Raccoons: So another thing I’m curious about is whether there will be more tokens added to the basket.
Jazzer: The exchange is hard coded to 16 tokens listed. So we can’t add new tokens. We can however replace tokens and will do so based on performance (i.e. volume) at the DEX, subject to governance votes. That’s the only mechanic to get new tokens on the existing DEX.
We do however have big plans for expansion once we hit the required liquidity on this DEX. There will be a MoonPlaza (providing key trading pairs and decent liquidity for upcoming projects) and a StablePlaza (think like Curve but as cheap as we can get it).
DeFi Raccoons: OK so the governance token is really attractive to acquire for that among other reasons. To keep up with the token trends I suppose. Some things to look forward to.
Jazzer: Yes, the governance token will be used for goverance across all exchanges as well, so it’s really relevant for the whole ecosystem that we’re building.
DeFi Raccoons: Is there anything else you are excited to share about your roadmap or upcoming additions?
Jazzer: Well we recently announced that in the further future we’ll be launching a DEX on Radix since we are very excited about the potential of the Radix network to revolutionise DeFi. As soon as smart contracts are released on Radix we will be launching a multi-token DEX there as well, but that will likely not be before summer next year. So first order of business is to expand as much as possible on Ethereum!
TWITTER QUESTIONS
Question 1 @kenny_kimora asks “I understand that DefiPlaza is an exchange that works on the Ethereum layer 1 network but I would like to know why did you decide to work with layer 1 and not directly on layer 2? How do you see the progress of your exchange in the short and long term?”
Jazzer: The issue with Layer 2 IMO is that it doesn’t solve the problem of scaling DeFi, it just splits it into many different problems. The great thing about DeFi is that all these projects can interact with each other, and if we all move to different L2s that is no longer the case. And if we all move to the same L2 than that one will clog up. That’s also why I think the majority of the liquidity is still on Ethereum L1. Long term what we need is something that can do DeFi at L1. Like Radix. Short term, we do the best we possibly can on Ethereum, like DefiPlaza.
Question 2 @ArumiChannn asks “We know, Crazy gas costs rob most users of the benefits of agricultural products & other opportunities that DeFi offers, How does DefiPlaza save retail investors who suffer the most from high gas costs? Apart from that, what features make DefiPlaza products easy & cheap to use?”
Jazzer: Retail investors are the ones that are helped most by the reduction in fees and particularly gas costs in DefiPlaza. It helps to lower the barrier of entry into key DeFi services of swapping and earning revenue on your capital through LP fees and staking.
I think we covered which features make it easy and cheap in the earlier questions.
To get a bit of a flavor on the savings, watch this movie that a community member put together
Question 3 @Muhamma10500091 asks “The ‘Smart CONTRACTS’ of recent projects are prone to error and even previous large DeFi projects had the same problem, What is DefiPlaza’s Strategy for Overcoming Transparency and risk mitigation tactics? Are there any risks and AUDIT procedures?”
Jazzer: Indeed, the code has been audited. You can find a link to the audit report on our homepage.
The design philosophy of the smart contracts has been to keep it as lean and simple as possible. This helps to save gas, but also to minimize exposure to exploits. Together with the audit, that’s our strategy to mitigate risk.
Question 4 @Tawsif_H6 asks “Currently, most projects and platforms are in English. How will non-English local communities? Do you have any plan for them to better understand your project?”
Jazzer: Excellent question. The smart contracts don’t care what language you speak, it’s only the User Interface on the website. We do have an item on the roadmap to add translations into other languages, but simply haven’t gotten around to it yet. It’s coming though!
LIVE QUESTIONS
Question 1 @Black4_L asks “I think mobile app DEXes will be a game changer, any plans on being on mobile and have u factored the recent apple restrictions on crypto apps into your plans if u plan on launching on iOS as well? And who audited you”
Jazzer: We are currently compatible with MetaMask mobile, but you have to use the in-app browser. Adding WalletConnect is top priority, so that people can use a lot more mobile wallets with DefiPlaza. Pessimistic audited us.
Question 2 @Judelaww asks “I read from you’ve said above that DefiPlaza’s great feature is they can reduce 50%-65% gas fees cheaper than on UniSwap. are you sure there’s no hidden cost inside it?”
Jazzer: No hidden costs. No, gas won’t return to 1–4 Gwei, maybe on Eth 2.0 transactions will be cheap again but that will have it’s own issues.
Question 3@Lovely_DC asks “One thing I read about DefiPlaza is that the DFP2 exchange token will be used for governance of the entire ecosystem across all networks. How can users get involved in this? What is the minimum DFP2 to participate & How does this DAO help make the protocol more accurate & robust?”
Jazzer: We use the snapshot.org website for governance votes. There is no minimum number of tokens required, but votes are weighted by the amount that you own. Snapshot has the advantage that voting is gasless (free).
Question 4 @tolatlii asks “As I know DeFi Plaza aims for low cost L1 DEX on Ethereum.. Uses 50–65% less gas than other DEXs.. but what about the transaction speed??? We know speed matters too…”
Jazzer: Speed is the same everywhere. I do have a secret tip for everyone in here. If you don’t like failed transactions or getting front-run, you may want to read this website: https://docs.flashbots.net/flashbots-protect/rpc/quick-start
DefiPlaza
You can get the latest news updates of DefiPlaza from these official channels :
Website: https://defiplaza.net/
Twitter: https://twitter.com/defiplaza
Telegram: https://t.me/defiplaza
Medium: https://jazzerradix.medium.com/DeFi Raccoons
Telegram: https://t.me/DeFiRaccoons
Twitter: http://twitter.com/defiraccoons