Algebra Protocol - Bringing Concentrated Liquidity to SpiritSwap

Summary:

The Fantom chain is in need of a leading DEX with concentrated liquidity. Algebra protocol proposes to bring its concentrated liquidity technology to SpiritSwap, using its code that is already being utilized by leading DEXs like Quickswap on Polygon, Stellaswap on Moonbeam and more upcoming. With unique features such as adaptive fees, built-in farming, limit orders, DEXs utilizing Algebra's code will be positioned as leaders in the market.

What is Concentrated Liquidity?

Сoncentrated liquidity — is the liquidity allocated within a custom price range. This approach aimed at improving capital efficiency and compensating for the limitations of traditional liquidity models by allocating liquidity to specific price intervals, creating a concentrated liquidity position. LPs can open multiple positions in a pool, tailoring the price curves to their individual preferences and needs. When the price of an asset reaches a specific range, the aggregated liquidity for that range begins to collect trading fees with each LP receiving a proportional share. The new model offers benefits to both LPs and traders, with LPs being able to allocate capital effectively and earn higher fees, while traders benefit from deeper liquidity and reduced slippage. The use of liquidity from different LPs for trades is aggregated, meaning that users make trades against the total liquidity covering the current price without distinction as to which LP's liquidity their trades are utilizing.

More on concentrated liquidity: https://help.algebra.finance/en/liquidity/what-is-concentrated-liquidity

What is Algebra?

Algebra is a concentrated liquidity protocol that provides DEXs with the technology of concentrated liquidity along with its unique features: adaptive fees, built-in farming, limit orders, and more. The team behind Algebra used the concept of concentrated liquidity from Uniswap and improved upon it to build a more efficient and profitable protocol for both liquidity providers and DEXs.

More about Algebra: https://algebra.finance/

Dynamic Fees:

Uniswap V3 has four pools with different fee structures, but the majority of liquidity is usually concentrated in only one of them, making it challenging for liquidity providers to decide where to invest. Algebra's dynamic fees simplify the process by having only one pool based on volatility and pool volume. This means that liquidity providers earn more especially during volatile times, which may help cover impermanent loss.

Learn more in our tech paper: https://algebra.finance/static/Algerbra%20Tech%20Paper-15411d15f8653a81d5f7f574bfe655ad.pdf

Built-in Farming:

Algebra's built-in farming is a unique feature that allows liquidity providers to participate in two types of farming: Limit and Endless. Not only do they receive rewards from farming, but they also earn fees from their liquidity positions. Endless farming is an ongoing yield farm that lasts as long as there are rewards, while Limit farming is an event where rewards are limited and shared among those who enter before the start and lock their liquidity for the event time.

More on farming: https://docs.algebra.finance/en/docs/contracts/guides/liquidity-mining/overview

Limit Orders:

Algebra's recently released second version of the protocol includes a breakthrough feature of limit orders for concentrated liquidity. This allows for automatic closing of orders at a specific price without the need for an intermediary. This feature is designed to reduce price impact and provide new opportunities for market makers and traders, making the Algebra Protocol even more attractive to aggregators and regular users. This feature will be audited and provided to SpiritSwap after its release.

More on the new version: https://medium.com/@crypto_algebra/the-algebra-protocol-v2-updates-a-step-forward-d863181d10d8

Impact on SpiritSwap:

Concentrated liquidity is a crucial feature for DEXs in DeFi and has proven its efficiency through platforms like Uniswap and Quickswap. SpiritSwap will have access to fully audited and efficient code with concentrated liquidity and all of Algebra's features, including adaptive fees, farming, and limit orders. Algebra and SpiritSwap will be long-term partners, developing and implementing more features for concentrated liquidity. We strongly believe that this technology will increase SpiritSwap's volume and make it the best concentrated liquidity solution for the Fantom ecosystem as it was with QuickSwap.

Quickswap V2 has a Total Value Locked (TVL) of $140 million, yet it only averages $5 - $10 million in daily trading volume. On the other hand, Quickswap V3, with a much lower TVL of $40 million, is able to achieve a significantly higher average daily trading volume of $25 - $50 million. This highlights the increased efficiency of the V3 model compared to V2. The 1:1 and sometimes 1:2 TVL:volume ratio of Quickswap V3 is a testament to its effectiveness. With further concentration of liquidity, it is feasible that even higher performance figures could be achieved.

More Quickswap stats: https://quickswap.exchange/#/analytics

What Algebra Gets:

• A strong new partner and the first concentrated liquidity DEX on the Fantom chain
• $14,800 payment: with $7,000 allocated for the rights to the code and $7,800 for the UI modification and implementation services.
• UI change and implementation for Spiritswap by Algebra
• 15% of developer fees (V3 only), part of which Algebra will use to buyback ALGB, burn, and distribute into staking.

Other Terms of Agreement:

• Algebra will assume responsibility for the management of UI updates. Upon completion of the UI, Algebra will submit a pull request to the public repository for review by the developer team at SpiritSwap. Upon approval, the changes will be implemented to the live version.
• The deployment of the smart contracts will be carried out by SpiritSwap.
• Algebra will provide expert consultation in the deployment of any issues that may occur.
• Algebra will guide SpiritSwap through the whole integration process.
• Algebra will provide ongoing technical support for SpiritSwap.
• Both parties agree to promote each other's platform and technology.

Payment terms:

The payment for the project has been divided into two phases:

• The first phase will involve an initial payment of 50% ($7,400) to Algebra, following the decision of the DAO to proceed with Algebra's code.
• Upon successful completion and review of the UI, the second payment of 50% ($7,400) will be made to Algebra

Conclusion:

Algebra's concentrated liquidity technology and unique features will bring significant benefits to SpiritSwap and increase its volume in the Fantom ecosystem. This partnership will bring both parties long-term success and growth opportunities.

Links:

Website: https://algebra.finance/

Docs: https://docs.algebra.finance/en/protocol/guides/step-by-step-integration

ABDK audit: https://algebra.finance/static/ABDK_Algebra_Audit-b4a20379efce1d26b7fbe9127582df6a.pdf

Hexens audit: https://algebra.finance/static/Hexens_Algebra_Audit-0918594cb7666296d9f57295d9274270.pdf

Quickswap V3 analytics: https://quickswap.exchange/#/analytics

Quickswap V3 liquidity providing: https://quickswap.exchange/#/pools

Creation of Algebra’s code: https://medium.com/@crypto_algebra/introducing-algebra-tech-part-252499b098f6

Actions:

Approve = Bring Concentrated Liquidity to SpiritSwap Do nothing = Decline the proposal