The first ERC-1919 token, how to play AIR on Base?

Original author: 0x Jermo

Original translation: Peng Sun, Foresight News

Degen is Degen, but just a few days ago, AIR on Base launched a new mechanism called ERC-1919. What is this ERC-1919?

The problem with DEX trading is not necessarily a lack of liquidity, there may also be a risk of liquidity being maliciously attacked by anonymous developers.

AIR's solution is to solve this problem. The concept of ERC-1919 is not difficult to understand. I even think it is simpler than the ordinary Uni V3 (or even Uni V2) pool. In other words, if ERC-1919 is used, there is no need for DEX, and there is no need for LP to provide liquidity for the fund pool.

Instead of the traditional 50/50 LP model where prices are determined based on supply and demand, they use a multi-tiered mechanism. In this particular case, the price increases or decreases by a predetermined Delta value of 0.8% per tier.

The number of tokens in each tier is predetermined in the contract. If demand surges, the price will rise and ETH earnings will decrease relatively. When selling pressure is greater than buying pressure, the price will fall back to the previous level. If the buy/sell orders are too large and a single price level cannot handle them, the nearest tier will be filled and then continue to upgrade or fall back.

The great thing about this system is that you know what you are getting out of the system, and once you sell your tokens they are downgraded (and destroyed).

I think what’s fascinating about this mechanism is its potential for various future use cases, such as modified Dutch auctions, tier-based node sales, etc. Beyond that, I also find it very cool that this approach completely eliminates the issue of counterparty risk (since developers can’t Rug after launching LPs).