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Trader Joe’s proposes a solution to the problem of intermittent losses in DeFi

developers AMM-Protocol Trader Joe said they have found a solution to one of DeFi’s main problems, intermittent losses.

In a published whitepaper called Joe v2, experts explained the use of the variable commission Liquidity Book for swaps.

Trader Joe made sure that the feature would provide traders with “zero or minimal slippage” trading.

The developers added that the decision will reduce the loss of “many liquidity providers (LPs) in the DEX during market turbulence”.

In the process of holding assets in liquidity pools, intermittent losses occur when one is volatile relative to the other.

TheDeFinvestor analyst noted that many DEXs have intermittent losses that often exceed swap fees. For example, according to Bancor research, around 50% of liquidity providers in Uniswap V3 lose money due to this issue.

The Liquidity Book distributes the liquidity of the pair in the pool according to the price cells. While swapping, the change in the basket takes place at a fixed price. If there are insufficient funds, the swap moves to the next cell.

The solution provides two components of the commission: fixed and variable. The latter will depend on the volatility of the assets in each pair, allowing the LP to respond to price movements. The flow of liquidity to the pair will increase the depth of the order book, which will reduce the slippage.

Markus Thilen, IDEG asset manager investment director, told Cointelegraph that one of the reasons institutionalists are wary of DeFi is the issue of intermittent losses. The firm, like others, is therefore trying to stay away from AMM protocols, he added.

“Joe v2 whitepaper offers a new idea and that LPs 30 bp while performing transactions. This is an attractive income when the future growth of the industry is uncertain. We’ll see how much liquidity v2 will draw and how it will evolve TVLsaid Thielen.

Recall how ForkLog solves on the cards how the second generation DeFi projects solved the problems of the “first version”, including centralization, non-permanent losses and others.

Read ForkLog bitcoin news in our Telegram – cryptocurrency news, courses and analysis.

Source: Fork Log



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