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Decentralized finance (DeFi) platform Maverick Protocol has unveiled its decentralized exchange (DEX) on Ethereum, the protocol’s development team CoinDesk announced on Wednesday.
Powered by a native smart contract-based automated market-making engine (AMM) that the Maverick team has been building for over a year, the protocol allows investors to generate more revenue than UniSwap, one of the best DEXs, Bob Baxley, Maverick Chief Technology Officer, told CoinDesk in an interview.
Maverick’s latest addition is taking place in an increasingly competitive environment as investors seek decentralized trading venues following the spectacular demise of the FTX exchange and worry about the stability of centralized exchanges.
DEXs are built around pools of liquidity where traders can exchange assets, while investors – also known as liquidity providers – receive rewards from transaction fees for providing liquidity to make a market. The liquidity distribution is the price range at which investors allocate their capital to the asset pair in the liquidity pool. Of course, investors are drawn to commit their capital to protocols with higher, more stable rewards.
Maverick started with six liquidity pools, fundamental building blocks of DEXs similar to trading pairs on centralized exchanges, totaling more than $10 million to tokenize the largest liquid staking protocol Lido Finance, decentralized stablecoin issuer Liquity and to trade the Web3 identity data network Galxe.
Greater capital efficiency
New to Maverick is the dynamic automated market maker behind the protocol, allowing investors to charge more fees and maximize revenue from providing liquidity with a customizable liquidity distribution tool.
DEXs are built around pools of liquidity where traders can exchange assets, while investors – also known as liquidity providers – receive rewards from transaction fees for providing liquidity to make a market. The liquidity distribution is the price range at which investors allocate their capital to the asset pair in the liquidity pool. Of course, investors are drawn to commit their capital to protocols with higher, more stable rewards.
The story goes on
Instead of standard liquidity allocation, liquidity providers on Maverick can automate their own spread spread and bet on the future price of liquidity pool assets.
This allows investors’ capital to work more efficiently, covering broader price movements, with fewer idle periods where their capital sits idle because the asset price is out of range.
Maverick’s dynamic automated market making tool allows investors to capitalize when the price of the pool’s assets deviates. (Maverick Protocol)
“If liquidity providers in existing AMMs want to keep their capital as active as possible, they are forced to adjust their liquidity positions on an hourly basis, which costs them time and gas,” Baxley said. “By giving LPs the ability to choose if and how their liquidity moves with price in a given pool — something no other AMM does natively — Maverick allows markets to run more efficiently, resulting in a more consistent generation of fees.”
In a backtest for the last month, Maverick claimed the strategy has achieved 1,195% of average capital efficiency with no idle periods, resulting in about 10 times more potential income for liquidity providers compared to UniSwap.
To start, crypto traders on Maverick can access six liquidity pools with initial liquidity – Total Value Locked (TVL) – in excess of $10 million.
Maverick integrated popular liquid staking protocol Lido Finance and made its packaged ether derivative a key asset in the pools.
In addition to the wstETH/ETH pool, Maverick has also partnered with decentralized stablecoin issuer Liquity to offer trading pools for its LUSD stablecoin against ETH and wstETH, and with Galxe for a wstETH/GAL pool.
Those investors who deposit wstETH into the pools can also earn the derivative’s staking reward as well as usual income by providing liquidity.
In addition, the protocol hosts a USDC/USDT stablecoin pool and an ETH/USDC pool.
Maverick’s liquidity pools enable trading of USDC, USDT and LUSD stablecoins, ETH, Lido’s Liquid Staking Ether derivative and Galxe’s GAL token. (Maverick Protocol)
DEX competition
During a torrid last year for centralized crypto trading platforms, highlighted by the spectacular collapse of FTX, the resilience of decentralized alternatives sparked interest in DEXs. However, less user-friendly interfaces and occasionally subpar efficiency have stifled their emergence, executing only 5% of the daily trading volume of centralized exchanges.
Currently, decentralized exchanges offset the largest sector within DeFi, which is locked to the protocols, totaling $18.8 billion, according to data from DefiLlama. The leading platforms are UniSwap and stablecoin-focused swap protocol Curve Finance.
“Our goal is to be among the top five decentralized exchanges by volume within the next six months,” Baxley said.
According to Crunchbase, the protocol’s developer firm has raised $9 million in venture capital from backers including Circle Ventures, LedgerPrime and Jump Crypto, with Pantera Capital being the most recent investor last year, Maverick added.
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