balls has announced that its popular Liquidity Hub infrastructure is now available Quickswap on Polygon zkEVMThis marks the third major DEX deployment.
The availability of Liquidity Hub on QuickSwap on Polygon zkEVM means that users of the decentralized exchange platform can now access external sources of liquidity secured by Orbs' groundbreaking Layer 3 infrastructure network.
Orbs' liquidity hub provides a layer of optimization that is effectively on top of the QuickSwap on Polygon zkEVM Automated Market Maker, helping traders access external liquidity and receive better price offers with lower slippage. Instead of sticking to its own limited liquidity pools, QuickSwap on Polygon zkEVM can now seek better pricing offers for additional third-party liquidity sources such as AMM pools and private holdings. Other accessible sources include off-chain order books accessed via an API, paving the way for market makers and other institutional players to provide price quotes and help execute swaps.
Why fragmented liquidity causes problems
AMM-based DEX platforms have fundamentally changed the crypto industry. They have transformed the user experience by enabling peer-to-peer cryptocurrency exchanges in a completely self-managed manner, which has significantly improved security for crypto traders.
However, as transformative as they have been, DEXs are notorious for what is known as “slippage,” where trades are not executed at the quoted price (meaning they can be more or less expensive, it's a total lottery). Slippage is particularly problematic on large-volume trades like many DEXs there is a lack of liquidity In order to settle such swaps all at once, they have to split them into several small trades, all executed at different price ranges.
DEX platforms can achieve better prices and support higher volume swaps by gaining access to more sources of liquidity. However, the challenge is that the ecosystem is highly fragmented and liquidity is spread across hundreds of DEX AMMs across multiple blockchain platforms. This fragmentation makes it impossible to access third-party liquidity sources through other DEX platforms unless special infrastructure is used.
DEX liquidity fragmentation is widely seen as a negative for DeFi users as it impacts users with inaccurate pricing information.
DEX aggregators such as ParaSwap, CowSwap and 1inch have tried to solve this problem, but offer traders limited benefits as they keep a significant portion of the savings from token swaps for themselves, so users still do not access the most optimal price offers can. Nevertheless, these platforms pioneered the idea of concentrating fragmented liquidity pools into a unified pool. With the Liquidity Hub from Orbs, this concept finally delivers what it promises.
Concentrating liquidity to solve fragmentation
Liquidity Hub optimizes liquidity from a range of sources, ensuring traders can benefit from the full value of the savings offered by concentrated liquidity. It is built on Orbs' Layer 3 infrastructure and relies on both on-chain smart contracts and off-chain logic powered by decentralized nodes. With Liquidity Hub, DEXs like QuickSwap on Polygon zkEVM can attempt to execute every trade without going through their own AMM to limit any price impact. However, trades will only be executed if the Liquidity Hub can find a better price to execute the trade – if the DEX's AMM offers the best rate, the trade will proceed in that manner as usual.
In this way, Liquidity Hub will significantly improve the user experience of QuickSwap on Polygon zkEVM. It ensures that all funds remain in the user's connected wallets, with trades being executed on-chain via the Liquidity Hub smart contract, which also verifies that the swap provides a better execution price than the AMM. Only when the exchange is confirmed by the user will the trade be executed.
The Liquidity Hub also offers some handy features, such as protection against Maximum Extractable Value or MEV attacks. It can be viewed as a fully composable building block for DEX protocols, paving the way for anyone to provide additional liquidity. It offers the ability to connect to multiple solvers, allowing not only other DEX platforms, but also institutions and professional traders with large liquidity reserves to provide swap settlement offers. Meanwhile, Orbs’ decentralized network prevents any possible trade manipulation. With Orbs, transactions are secured through a network of “guardians,” who are permissionless validators using a proof-of-stake consensus mechanism.
Supporting scaling of DEXs
By bringing the benefits of aggregated liquidity to QuickSwap on Polygon zkEVM, Orbs helps provide better price offerings to the platform's users while ensuring MEV protection for liquidity providers. This means that QuickSwap on Polygon zkEVM will be able to support and scale significantly higher trading volumes without increasing pressure on its own liquidity pools.
Orbs’ Liquidity Hub has already been integrated with QuickSwap on Polygon and THENA on BNB Chain, making today’s integration the third major implementation of the protocol.
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