JustSwap - Crypto Academy / S4W5 - Homework Post for @kouba01
1. Present the Just Swap platform in your way, demonstrating its importance within the Tron ecosystem blockchain.
Tron Blockchain is a smart contract-based infrastructure just like Etherum Blockchain. But the fee in Tron is lower, and the transaction throughput is significantly higher than Etherum.
Fees in Tron- Nil for general Transactions. For Smart contract Transactions, it requires Bandwidth and Energy.
Transaction speed- 3 seconds
It was established in the year 2017 by Justin Sun. It provides a scalable infrastructure for decentralized applications. So the end-users, developers, businesses integrate and interact with each other in the fastest possible way in Tron Blockchain.
DeFi boom started in the year 2020, which is also a significant reason for the rally of various coins and their projects. DEX is a significant branch of DeFi. Earlier the centralized exchanges were the only player to exchange the asset. And DEX existed, but they were not relevant because of liquidity issues.
Since the rise of AMM-DEX, the liquidity issue is solved; in AMM-DEX, the liquidity term is not relevant, as it does not work based on liquidity to make an exchange feasible for the end-user. So some people even started calling it unlimited liquidity. I will put more light on this later.
AMM- Automated Market Maker
So Justswap is an AMM-DEX exchange protocol on top of Tron Blockchain where the native coin of TRON, that is, TRX can be exchanged for other TRC20 standard tokens; also can exchange the various TRC20 tokens for other TRC20 standard tokens. The exchange trading fee is 0.3%.
Since Justswap is a decentralized protocol, the exchange trading fees collected are distributed among the liquidity providers.
So Justswap is an AMM-DEX platform where the users make market opportunities from themselves. Those who have assets and capital contributions to the liquidity pool and want to exchange one asset for another pay 0.3% fees, which goes to the liquidity provider. There is no central entity that takes the trading fees.
The recent economic report suggests that the Total Locked Value(aka TVL) has surpassed 8.2 Billion USD in Just DeFi, and JustSwap contributes 1.4 Billion USD TVL to Just DeFi. The Coinmetrics also suggests that the nos of Transactions in Tron top compared to BTC, ETH, EOS, etc.
The last 30 days' activities of Justswap from dapp.com show that the userbase has gone up by 26.17%, the 30-day transaction has gone up by 5.3%, and the 30-day transaction volume is marginally down by 2.75%.
Importance of Justswap
Just like the Blockchain, Justswap is also decentralized. So here, both the backend and the front end are decentralized. That's a substantial evolution of decentralized finance where economic accessibility will get more potency. The last person in the global world can afford and access the DeFi.
Most of the applications are bound to upgrade themselves to Web 3.0 in this decade, just like we marched from 2G, 3G, 4G. So most of the centralized applications of Web 2.0 will be of no use in traditional finance. Justswap and Tronlink are web 3.0 applications. So they are already ahead. Traditional finance is also centralized, where there is always a fear of privacy issues, account seizure. Decentralized Finance is key-based and web 3.0 compatible. For that matter, Justswap leads the race as it is a web 3.0, and it allows web 3.0 wallets like TronLink to interact with it.
No KYC is needed to make an exchange using Justswap. As I said, web 3.0 applications do not need that. If you have the key to your web 3.0 wallet, you can sign and interact with any web 3.0 application. So Justswap can be used using a web 3.0 wallet. I do not need to become KYC compliant user for that. I do not need to send my sensitive documents to a third party who can use them for Money laundering and criminal activities.
Fees and Transaction throughput always make a dapp competitive. Justswap being an application in Tron Blockchain is cost-effective and also quite fast. I do not need to wait for more than 3 seconds. So almost instant. Here the fees are not charged in native tokens if you already have the required Bandwidth and Energy. Only when you fall short of the required energy will it charge you fees in TRX to exchange an asset. So I have more options when I use Justswap.
An exchange like Justswap makes the movement and flow of one asset to the others. So the users get a chance to interact with each other. When the assets start to flow from one hand to another, it generates economic opportunity for all, liquidity providers, users, developers, etc. Think of it like commodity exchange; every time an exchange happens, there will be specific fees, as Justswap is a DEX that will go back to the users, not any central entity. It empowers the dwellers in Tron.
2. What tokens does JustSwap support trading? How is the price of a JustSwap token determined (how it works)? Use an illustration to explain it. (screenshot required)
Justswap is an AMM-DEX exchange protocol to exchange TRX, TRC20 tokens.
(a) TRX to TRC20 tokens
(b) TRC20 to TRC20 tokens
Coinmarket shows that 30 assets are listed in Justswap. The top 3 coins with the highest volume are Tether, Bitcoin TRC20, and USDJ. These three assets account for 78% of the total trading volume in JustSwap.
Popular Listed Coins in Justswap: SUN, BTC, WBTC, ETH, WETH, WBTT, WTRX, JST, WIN, DICE, LIVE, USDT, USDJ, TUSD, LTC.
The last 24 hour reported trading volume in Justswap is 41 Million USD.
In an AMM-DEX exchange like Justswap, you will find the list of assets, TRC20 tokens, and TRX.
To exchange one product for the other, you need a pair and a liquidity pool. The pair has to be equally weighted and balanced on both sides.
For example, if you want to add 100 USD to the liquidity pool of a pair TRX-USDT, then you have to add 50 USD worth TRX and 50 USD worth USDT. In return, you will get a TRX-USDT LP token.
An exchange pair and a liquidity pool together form an LP token.
That is why when you add liquidity in Justswap; you get an LP token in return. And when you redeem your LP token, you get back your solo coin again.
How is the price of a JustSwap token determined (how it works)?
To understand an AMM-DEX Justswap, you have to go back to Orderbook centralized exchanges.
I will take you to the order book of the STEEM/USDT pair from Huobi.
The highest bid= 0.6163
The lowest ask= 0.6171
Spread= 0.6171- 0.6163= 0.0008
In the orderbook model, you are dependent on your counterpart. If there is no buyer or seller, the orderbook is irrelevant. You can not make an exchange for that pair, so there is no use if such a pair exists in an Exchange, but liquidity is not available, or very thin liquidity, which does not make it feasible.
AMM works differently from Orderbook. AMM exchange depends on the liquidity pool, not on the counterparty.
And the liquidity pool should be balanced by the formula XY=K
X= K/Y, Y= K/X
If X deviates from its neutral position, another trader brings it back to the neutral position, generally called arbitrage trading.
When a liquidity pool is created, the first player or the first contributor to it first sets an exchange rate; it can be different from the Coinmarketcap rate. But if it is different from the Coinmarketcap rate, then it is an opportunity for arbitrage trading.
So whether you set a rate as per the Coinmarketcap rate or a different rate, it will ultimately return to the neutral position by arbitrage trading.
XY=K
1st Trade- X----> Y Deviation from the neutral position
2nd Trade- X----> Y Deviation further increased in the same direction
If you want to exchange the asset X for the Y, the deviation will be towards Y. if another trader comes after you and trades in the same direction, the deviation will further increase. Recall, it's going to create an arbitrage trading opportunity if the deviation goes far away from the neutral position.
If a third trader joins and trades in the opposite direction, it will return to the neutral position again.
3rd Trade- Y----> X Deviation increased but in the opposite direction. It will try to return to the neutral position again.
In summary, any deviation is always an arbitrage trading opportunity. But minor deviations won't attract arbitrage traders. It will get balanced naturally from the genuine and regular exchanges.
Having a pair in AMM-DEX and having a liquidity pool guarantees an exchange. But it is not valid for any size of the trade.
Price impact still exists in AMM-DEX, and that depends on the size of a trade.
I will show you a pair of TRX-LTC in Justswap.
When I entered 100 TRX for LTC, it showed me a price impact of <0.01%, which is reasonable.
But when I entered 1000000 TRX for LTC, it showed me a price impact of 23.17%, which is intolerable for a trader, not at all cost-effective.
So to counter such a high impact on heavy orders, the conventional strategy traders generally adopt is to break the big size orders into small orders to keep the price impact below 0.1%.
The slippage and price impact of the XY=K curve of AMM-DEX is contained within a specific zone as per the standardization of this mathematical function and it is said that the slippage is contained with 1% of the liquidity pool size.
If you want to trade 100USD worth of crypto with slippage below 0.1%, the liquidity pool should be 100 times bigger, that is 10000 USD.
For all popular trading pairs, the liquidity pool is bigger, but for less popular coins, the liquidity pool is not that big, so big players can not take advantage of AMM-DEX.
From every trade of AMM-DEX Justswap exchange, a 0.3% exchange fee is collected and distributed among the liquidity providers.
3. How do I connect my wallet to JustSwap.io? Is there a mobile app?
To connect your wallet with JustSwap, you need to have TronLink Wallet. There are two ways to connect TronLink Wallet to JustSwap.io. You can connect through the TronLink Pro (Mobile App) or connect through the JustSwap.io website directly. You can connect the wallet in a way that you feel is appropriate and easy. Here I am connecting the wallet through the website. Additionally, Make sure that you are logged in to your Tronlink wallet.
- Go to https://justswap.io/
- Now, click on the Connect Wallet button on the left side of the main interface.
- A pop-up will appear, where you can find the Tronlink Wallet option. Select Tronlink Wallet.
- Now, it will take you to the next pop-up, Here you can see the Tronlink prompt to connect the wallet.
- Click on the Connect button (JustLend will interact with your TronLink Wallet, powered by a smart contract.)
- Lastly, on the same left side, you can find your Wallet's TRX count, i.e., Your wallet has been successfully connected to Justswap.
If you use the website to connect Tronlink Wallet to Justswap, then follow the steps shown above.
Is there a mobile app?
No! There is currently no direct mobile app available to interact with JustSwap. You can either use the official website or use the Tronlink Pro Mobile App to access JustSwap.
If you are an android user and want to access JustSwap from mobile, use the TronLink Pro app available on multiple platforms. For example, Android, IOS, and Huawei HarmonyOS.
To access JustSwap with Tronlink Pro, Go to Discover (third option in the bottom menu). Here you can see various Dapps such as JustLend, Just, Sun, Just swap, Tronscan. Simply Click on JustSwap.
4. Include a real example of your interaction with Just Swap, demonstrate how you can trade on the platform
Steps to interaction with Just Swap (Trade):
- Visit https://justswap.io/.
- Now, click on the Connect Wallet button on the left side of the main interface & connect your wallet to JustSwap.
- Go to Swap function. The Swap function is for trade & the Pool function is for obtaining the LP tokens by adding Liquidity in Justswap.
To trade, you now need to enter the token amount and select the currency with which you want to trade. As in JustSwap, the pricing mechanism is entirely automated; the estimated value of the traded currency is entered automatically.
- Now select any pair of the tokens in JustSwap, you want to trade. For example, I have selected TRX/USDT.
- Enter the amount you want to exchange/swap. I have entered 2.5 TRX for USDT.
- Click on Swap => Then Confirm Swap.
- Now, a transaction pop-up will appear, requests you to complete/sign the transaction. In this section, you can notice the fees & available resources.
- Click on Sign => A prompt appeared telling me that my swap function was completed.
- Swapping completed now.
- Now check your wallet or explore the Tronscan to locate your token (USDT).
Transaction history/details from TronScan.org :
I selected the TRX/USDT pair and swapped 2.5 TRX for USDT, I obtained 0.258 USDT Token on https://justswap.io/ & in my wallet. And this transaction consumed 350 bandwidth & 48,363 energy.
5. Include a real example of your interaction with Just Swap, explain How to add liquidity to JustSwap.
Steps to adding Liquidity in Justswap:
- Visit https://justswap.io/ => Connect your wallet.
- Switched to Pool from the swap.
- Click on Add Liquidity
- Now select any pair of the tokens in JustSwap. I have selected USDT/TRX.
- Enter the amount you want to supply. I have entered 2.5 TRX.
- Click on Supply => Then Confirm Supply.
- Now, a transaction pop-up will appear, requests you to complete/sign the transaction.
- Click on Accept.
- Now liquidity is successfully added.
Quantity of LP Token obtained by adding Liquidity in Justswap:
=> Check your wallet or explore the https://tronscan.org/. You can also check the quantity on the "Pool" page.
Transaction history/details from TronScan.org :
As I have selected USDT / TRX pair and supplied 2.5 TRX + 0.258 USDT liquidity, I obtained 3.421 S-USDT-TRX LP Token on https://justswap.io/. And this transaction consumed 383 bandwidth & 60,902 energy.
6. Conclusion:
Every technology innovation has its pros and cons. AMM-DEX is no doubt the best DEX ever and solved the liquidity issue. It is compatible with Web 3.0 applications. The traders don't need a counterparty; they need a liquidity pool only. It makes the ecosystem self-reliant as the hodlers contribute to the liquidity pool and earn interests and the traders exchange the asset to fulfill their needs.
In other AMM-DEX, the high fees can still create a barrier for the retail trader, take the example of Etherum, can you trade 10 USD worth of an asset when the fees are higher than 20 USD.
Technology innovations work well with scalable infrastructure and cost-effective platforms. AMM-DEX Justswap is that DEX, which is web 3.0 compatible, cost-effective, and you can trade low amounts also, 1 USD worth crypto or below.
Big size trades still do not perfectly fit in AMM-DEX; slippage-intolerance forces them to rely on centralized exchanges. Just having a liquidity pool guarantees an exchange, but if the liquidity pool size is smaller, you may not be able to perform trade with a price impact below 1%.
In summary, AMM-DEX Justswap has more advantages, and the disadvantages are not accountable to Justswap, rather the entire AMM-DEX thing. A few of them may be interoperability issues, slippage-intolerance for large-size orders, etc.
Thank You
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Hello @dharamps,
Thank you for participating in the 5th Week Crypto Course in its 4th season and for your efforts to complete the suggested tasks, you deserve a Total|10/10 rating, according to the following scale:
My review :
Excellent and integrated content, as you respected all aspects required to be clarified, including the illustration.
Thanks again for your effort, and we look forward to reading your next work.
Sincerely,@kouba01
Thank you, prof.
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