BSV thought leader and developer Joshua Henslee released a new video on April 4th detailing RelayX’s new AMM exchange. You can watch the video from the link or read the synopsis below.
What is the RelayX Automated Market Maker (AMM)?
RelayX has released an automated market maker on BSV. This enables the instant exchange of fungible tokens in the RUN protocol.
While direct swaps are ideal for non-fungible tokens (NFTs), AMMs may be better suited for exchanging BSV for other fungible tokens due to their liquidity pools.
As with other such pools, the idea is to entice users to provide liquidity for a fraction of the fees, often referred to as yield farming. Other examples of this include TokenSwap on BSV and Uniswap on the Ethereum blockchain.
Comparison of RelayX AMM with TokenSwap
According to Henslee’s video recording, there is very little liquidity in the RelayX pools. There is also only one pair, namely BSV/SHUA.
However, Henslee says RelayX’s decision to build on the RUN protocol and the low fees it brings will give it a long-term advantage. He also believes the two will serve different markets; TokenSwap will mainly serve the Eastern markets while RelayX will mainly serve the Western markets.
At the moment, Henslee finds TokenSwap fees unacceptably high. Despite being much lower than other blockchains’ fees, he believes that even the $0.60 fees he currently pays are unacceptable. While this isn’t a major issue right now, Henslee believes it will be in the future.
How will RelayX incentivize liquidity providers?
The way AMMs work is to incentivize users to provide liquidity for a fraction of the fees. Right now there is only $20,000 of liquidity on the RelayX AMM. Likewise, there is always a risk of temporary loss due to volatility, which in turn is compounded by low liquidity.
Henslee examines how TokenSwap has attracted liquidity to its pools for potential solutions. It added a Tron-Tether bridge, allowing people to tokenize Tether and bridge it to the BSV blockchain. This increased their liquidity by over a million in one day. RelayX has already done this to some extent with USDC. While there are still doubts about USDC, Henslee considers it to be less risky than Tether.
Henslee acknowledges that a stablecoin on BSV is a contentious issue, but he believes it would be a good way to attract liquidity. He notes that fees for using USDC on chains like Ethereum are “getting out of control and only getting worse.” However, he does not know how RelayX can use USDC without opting for Ethereum and paying the associated fees.
Another way for RelayX to attract liquidity would be to offer a swap for SAITO. While this is tokenized on Ethereum, BSV users have been able to speculate about it in the RUN protocol. Henslee believes that if RelayX offers a Saito swap, it will attract users from other blockchains looking to swap with lower fees. He concedes that economic incentives will prevail and that most users don’t care what blockchain they use. They will be happy to use BSV when they see the cost savings. This will then lead to a virtuoso cycle of increased liquidity leading to new pairs leading to a greater increase in liquidity and so on.
Henslee is excited about the new RelayX AMM
All in all, Henslee is enthusiastic about this development. He believes it will attract more liquidity and users to BSV. The lack of liquidity is one of the biggest problems and this could be the solution.
In addition to new users, Henslee notes that RelayX has many existing users compared to TokenSwap. While the latter currently has many more pairs, Henslee believes the gap will close sooner rather than later. These existing users will likely want to use the RelayX AMM, giving it another edge over its competitors.
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