KittenSwap Preview (3): Free AMM Liquidity without LP, a new way of distributing tokens, and AMO
This is part 3 of the KittenSwap series, in which we gradually present our design for the next-generation swap.
1. You Don’t Need LPs for AMMs
Here we show it’s possible to have good liquidity without LP.
And then problems like IL (impermanent loss) and “how to provide LP incentives” are gone forever.
Liquidity is essential for a new token, hence there are tokens with LGEs (Liquidity Generation Events), where LPs lock significant amount of ETH to provide permanent liquidity.
However consider this:
- In the beginning, let the contract claim it has 1000 ETH + 10000 token, even though there is only 0 ETH + 10000 token in the contract.
- The initial price of the token is 1000/10000 = 0.1 ETH per token.
- Albert sends 10 ETH to buy 99.01 token. The price is 0.101 ETH per token.
- The contract now claims it has 1010 ETH + 9900.99 token. The price is 0.1020 ETH per token.
- Betty sends 20 ETH to buy 192.25 token. The price is 0.10403 ETH per token.
- The contract now claims it has 1030 ETH + 9708.74 token. The price is 0.1061 ETH per token.
- Albert sells all 99.01 token for 10.40 ETH. The price is 0.1050 ETH per token.
- The contract now claims it has 1019.60 ETH + 9807.75 token. The price is 0.1040 ETH per token.
- Betty sells all 192.25 token for 19.60 ETH. The price is 0.1020 ETH per token.
- The contract claims it has 1000 ETH + 10000 token. The price is 0.1 ETH per token.
And the full circle is completed. Everything always match.
Therefore there is no need to lock any initial ETH at all.
Everyone can enjoy the “1000 ETH” liquidity for free.
The liquidity is always there for you.
And you can pick any number - 10000 ETH, 1000000 ETH, as you wish.
Liquidity is finally free.
2. A New Way of Distributing Tokens
As an example of KittenSwap “Free Liquidity” innovation, we build a token LIQUID which will be released on https://www.kittenswap.org/ soon.
Because LIQUID does not need any LP to provide liquidity, there’s no need to charge the 0.3% LP fee at all.
So we decide to still charge “LP fee” for transaction, but use it to reward all LIQUID holders.
LIQUID comes with 2100 ETH + 21000 LIQUID liquidity.
- Its liquidity is always better than 2100 ETH. The price impact is small even for large orders.
- Its price is always higher than 0.1 ETH, even if everyone sells.
LIQUID is deflationary. Its supply always decrease.
- When you transfer LIQUID, 0.6% of it is burned.
- When you sell LIQUID, 0.6% of the received ETH will automatically buy back LIQUID and burn.
- When you buy LIQUID, there is zero fee.
Therefore LIQUID holders can automatically collect TX fee without IL risk, unlike Uniswap where one has to become a LP.
Let’s compare the fees of KittenSwap LIQUID with Uniswap.
- KittenSwap charges 0% (buy) + 0.6% (sell) = 0.6%.
- Uniswap charges 0.3% (buy) + 0.3% (sell) = 0.6%.
Therefore LIQUID is not charging any tax at all, unlike previous deflationary tokens with extra heavy tax.
Currently the testnet version of LIQUID is on https://www.kittenswap.org/ .
We will launch mainnet LIQUID soon.
3. A New Kind of Order : AMO
Finally, this means we can have a new kind of order on KittenSwap, besides limit order and WLO (discussed in part 1 of this series).
It’s also one-sided liquidity too.
We can name it AMO (Automatic Market-marking Order).
Deposit some assets to KittenSwap, set the amount of virtual assets to pair with it, and you are done.
Let’s consider an example.
Albert deposits 1000 token, and pair it with 500 virtual ETH.
Then the initial price of this AMO is 500/1000 = 0.5 ETH per token.
Notice you can’t sell token to this AMO yet, because its price is not above the initial price.
However you can buy token from this AMO.
If you send 10 ETH, you will receive 19.61 token.
And then its price is above the initial price, which means you can now buy & sell token using it (you can sell token to it as long as the price does not go below 0.5 ETH).
Now Albert is providing AMM liquidity with only one order.
And Albert can set the initial price & amount of virtual assets, hence he has much better control over everything than being a Uniswap LP.
Join our Telegram and Discord ( on https://www.kitten.finance/ ) for updates of KittenSwap.