DeFi: Swaap steps up a gear with V2
Following the success of V1, the decentralised market maker will be able to offer liquidity providers much greater flexibility.
Development accelerates at Swaap! Three months after announcing that it had raised €4.1 million in funding, the French start-up is upgrading its protocol to V2, which should enable it to go one step further and win over more users. The new version has been available since Monday morning.
Swaap is one of a number of projects aimed at improving the financial system. According to its creators, decentralised finance (DeFi), the principle of which is to bring transparency and reduce the number of financial intermediaries, would be a "fairer, more efficient and more secure" infrastructure.
Swaap is what is known as a market maker, i.e. an actor who acts as a link between buyers and sellers on a market. But unlike traditional market makers, Swaap is not just for institutional players. Anyone can provide liquidity and earn a return on it, while retaining control over their funds (non-custodial).
"With V1 we showed that it was possible to do on-chain market making profitably, but now we're going to provide a lot more flexibility," explains co-founder Cyrille Pastour. "While we were only on Polygon, our new infrastructure will allow us to go on many other blockchains, starting with Ethereum. We will also be offering many more assets," he insists.
Until now only WETH, WBTC (versions of ETH and BTC that can be used on Polygon) and USDC were available on Swaap.
Swaap will not be offering just any asset, however. "We will be selective, but this paves the way for partnerships with DAOs, such as the one we recently forged with Frax," continues Cyrille Pastour. Other tokens, such as those linked to Liquid Staking with stETH, will be arriving soon, as well as stablecoins.
Swaap V2 will also offer some riskier models, to provide the opportunity for liquidity providers who so wish to obtain even higher returns.
The protocol has not yet issued any tokens, but the team is already planning to do so by reserving a portion for its first users. This is the same model as that chosen by Morpho, another French DeFi protocol launched in 2022.
"The aim is to reward the people in the community who are helping to get the protocol off the ground", justifies Cyrille Pastour, who points out that the token will not be "live and freely exchangeable", as "we feel it's too early due to the level of maturity of the project".
Swaap looks set to play a major role in DeFi in the coming years, filling a major gap in Uniswap, which also plays the role of market maker on its decentralised exchange platform (the biggest in the world with almost 60% market share).
"Automated Market Makers like Uniswap have negative returns with a very high level of risk. They are similar products to casinos from the point of view of liquidity providers," emphasises Cyrille Pastour.
This potential loss, also known as impermanent loss, materialises when you experience the volatility of a pair of tokens placed in a liquidity pool. According to Cyrille Pastour, this can be as high as 30% on Uniswap, whereas it is limited to just 0.1% on Swaap. Is that enough to convince everyone?