By Petrache Ionut Aug 23, 2022
High trading costs are limiting the success of Decentralized Exchanges and are preventing DEXes from dominating the crypto exchange landscape. A large fraction of the trading costs on DEXes results from indirect (also called triangular) trades - trades involving more than one leg. Such triangular trades amounted for about 40% of all non-bot trading volume in 2021-2022, and led to losses of over $500M in 12 months on major DEXes.
What is VirtuSwap?
VirtuSwap is on a mission to solve these inefficiencies and help DEXes win the exchange business.
Utilizing cutting-edge financial engineering, VirtuSwap eliminates triangular trading by making every transaction direct, even in the absence of an associated pool, and achieves up to a 50% reduction in trading costs.
The VirtuSwap solution is based on reserve-powered virtual liquidity pools, where trades are carried out by building temporary, finite reserves of tokens that are not native to the pool, which are small (relative to pool size) and short-lived
The benefits of this innovative design are significant. Simulations employing real data parameters show that VirtuSwap financial technology provides substantial reduction in liquidity traders' costs, specifically in price impact (around 30% for currency pairs involving medium sized currencies) and higher returns and Sharpe ratios of liquidity providers, especially in trading pairs outside the top 5 coins.
The principal reason for the ability of the VirtuSwap algorithm to reduce trading costs and simultaneously increase liquidity providers’ returns is its ability to reduce arbitrageurs’ profits.
In existing AMMs, arbitrageurs – typically referred to MEV bots – capture a large chunk of the costs associated with price impact paid by traders. The reason is that large trades create price imbalances leading to arbitrage opportunities. These price imbalances occur due to a reduction in the size of one side of the pool and an increase in the other side. When trading via reserves, the price imbalance is due only to the first effect, whereas the second effect is absent. The resulting smaller price imbalance leads to lower profits captured by MEV bots – and more money stays in the pools, raising liquidity providers’ returns. As a result, VirtuSwap breaks the link between liquidity traders’ costs and arbitrageurs’ profits, making arbitrageurs’ gains much smaller than liquidity traders’ costs.The remaining difference goes to the LPs, increasing their returns.
Thus, VirtuSwap achieves a result that was seemingly impossible before - it reduces costs for traders and increases the LP returns at the same time!
Overall, VirtuSwap financial technology makes it possible to trade on a decentralized AMM-powered exchange at substantially lower costs while also improving expected returns to liquidity providers.
VirtuSwap tokenomics is based on VirtuSwap token $VRSV and a governance token $gVRSV.
The total number of VRSV tokens to ever be minted is 1 billion (1,000,000,000). The expected token distribution is as follows:
- 27% — founding team and pre-launch employees;
- 7% — pre-seed investors;
- 2% — advisors;
- 7% — seed investors;
- 4% — post-launch employees and advisors;
- 1% — initial distribution to the protocol;
- 2% — pre-launch airdrops
- 50% — gradual release to community
All founding team’s, employees’, investors’, and advisors’ tokens are subject to 36-month vesting and 12-month cliff.
The community tokens will be released over a 15 years period on a month-by-month deflationary schedule, and will be used to incentivize LPs.
Staking VRSW tokens produces gVRSW tokens that can be used for submitting governance proposals and voting on them, where the voting power is proportional to the number of gVRSW tokens held. Staking VRSW tokens also provides boost to LP rewards of the staker, which are gradually increasing in the staking time. Locking VRSW tokens is also possible, further boosting LP returns.
For more details on VirtuSwap tokenomics, see the article here, and for complete, technical explanation of the VirtuSwap algorithm and simulations, read the VirtuSwap Tokenomics Whitepaper..
The VirtuSwap Core Team
Professor Evgeny Lyandres is the founder of VirtuSwap. Evgeny is a Professor of Finance at Tel Aviv University, and is the most published and cited finance professor there. He is also head of TAU Blockchain Research Institute and is frequently asked to deliver lectures on blockchain, crypto, and DeFi at top Universities on four continents. Evgeny is also a member of the Crypto and Blockchain Economics Research Forum. Evgeny’s academic experience spans 18 years, spent at Boston University, Rice University, and the University of Rochester.
Professor Roni Michaely is the co-founder of VirtuSwap. Roni is a Professor of Finance at the University of Hong Kong and is the Head of HKU-TLV Innovation Hub in Tel Aviv. Roni is one of the most cited finance professors in the world, a passionate investor, and board member to several startups. Roni has 30 years of academic finance experience, mostly at Cornell University.
Alex Zaidelson is VirtuSwap’s Business and Data lead, he is an executive with vast experience in Product Management, Business Development, R&D, and Marketing. He is the co-founder and former CEO of Agora Labs, former CEO of Beam, and an advisor to several startups.
Daniel Jaffe is VirtuSwap’s CTO. Daniel, a blockchain architect and serial entrepreneur, has 5 years of experience in the Israeli Defense Forces intelligence branch as a SW Team Leader. Daniel has been a CTO of several startups in the blockchain space, and has been advising ICOs and IDOs for several years. Overall, Daniel has 15 years of software development experience, and has been developing dApps for over 5 years.
Jonathan Zorno is VirtuSwap’s COO. Yoni is a lawyer by trading, and has spent time at the Israel Competition Authority. Yoni has also acted as a head of section at the intelligence unit of the Israel Defence Forces. Prior to joining VirtuSwap, Yoni was the General Counsel and acting head of financial operations at DAOStack.
Olga Dudina is VirtuSwap’s Head of Marketing with 7 years of digital marketing experience and former marketing manager of various crypto and NFT projects.
In addition, VirtuSwap has several other important contributors, working on smart contracts, back end, and front end, data science and optimization, as well as UI/UX design, and marketing/community development.
With a Team so capable and passionate about this protocol and an unparalleled financial engineering aimed at bringing efficiency and increased revenue to VirtuSwap users, this protocol seems to have its way paved to become a significant player in DeFi for years to come.
Website - https://virtuswap.io
Telegram - https://t.me/virtuswap_official
Twitter - https://twitter.com/VirtuSwap
Medium - https://medium.com/virtuswap