Explaining MantisSwap: New AMM on Polygon zkEVM

区块律动BlockBeats

特邀专栏作者

2023-04-28 21:30 (UTC+8)

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An ambitious project built on Polygon

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An ambitious project built on Polygon

Original compilation: Kxp, BlockBeats

Polygon zkEVM is a new innovation in the Polygon ecosystem. ZK expansion will be the next big theme after Optimistic Rollup (Arbitrum, Optimism, etc.). However, not many protocols are being developed on top of zkEVM yet.

The Polygon zkEVM mainnet beta was launched less than a month ago (March 27). The first protocol to develop on it has the potential to be one of the most promising protocols on Layer 2.

Polygon is a mature scaling solution (#2 TVL) with many partners and projects developing on it. zkEVM is a new project from the Polygon team and may gradually become their top priority. Vitalik Buterin also symbolically executed the first mainnet transaction.

introduce

MantisSwap, a decentralized automated market maker developed by Mantissa Finance, can efficiently and securely trade anchor assets on Polygon. It goes live on Polygon on March 20th, so we can get involved very early.

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problem and solution

First introduced by Bancor and popularized by Uniswap, AMMs have contributed to the explosive growth of DeFi in the past few years, but it is not perfect. Mantissa developed MantisSwap to solve the problems of existing AMMs.

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technology

Like other single-sided AMMs, Mantis uses the concept of asset-liability management (ALM) to maintain accounts for each token, recording assets and liabilities. This design enables unilateral liquidity supply.

Unilateral liquidity provision removes impermanent losses, but is replaced by what they call inventory risk. Inventory risk arises when the total liabilities of the protocol are greater than the total assets in the system.

This risk can be calculated, and it can also be prevented through their inventory risk factors. The following figure is one of their risk mitigation mechanisms:

As we have recently seen with USDC, even for a fully backed stablecoin, panic in the market can trigger a decoupling event. This is why risk mitigation mechanisms and capital protection for LPs are critical to catalyzing growth in this sector.

For decoupling events, Mantis has two solutions to mitigate risk: Net Liquidity Ratio and Risk Tolerance Variables. Among them, the net liquidity ratio can reflect the health of the agreement. Under normal circumstances, Mantis' net liquidity ratio will be close to 1.

The decoupling of tokens may lead to a decrease in the net liquidity ratio, which may cause huge losses to LPs. Their slippage curve design protects liquidity providers by protecting net liquidity ratios from getting too low. Through transaction fees and other incentives, LP losses can be offset.

Risk tolerance variables are determined for each token in the pool. Determines the amount of risk the protocol is willing to take in the event of a token depeg and prevents the liquidity ratio of volatile tokens from exceeding a certain threshold.

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