Permaswap DEX: First Insights Directly From its Founder
Wen Arweave DEX? $AR we there yet? Well, almost. Yesterday everFinance announced the impending release of its own native Arweave DEX called Permaswap. Today we are presenting you an interview with everFinance’s founder, Outprog, the mastermind behind this project. Without further ado, let’s see what Outprog has to say about their creation!
Before diving in, can you please describe in general terms what Permaswap represents?
The DEX is a critically important part of any blockchain ecosystem. Still, unfortunately, we don’t have one in the Arweave ecosystem. The members of this community even made a MEME of “ Wen DEX?” But I want to say, not wen, just now! If you visit the everPay’s official website, you will see a Swap page with several trading pairs that can help your exchange needs.
Although this swap doesn’t open LP to provide liquidity and few trading pairs, it’s already a prototype of DEX. As our financial protocol everPay becomes more mature, we will also optimise swap’s technology solution. We will open-source it to the community to build the first community-driven DEX on Arweave — Permaswap.
Permaswap Network is an entirely P2P Network, and the consensus comes from Arweave. If you are familiar with SmartWeave, you will know that SmartWeave’s token balance is generated by an off-chain calculation, as is Permaswap’s consensus that the corresponding token balance is developed based on Arweave’s transaction data. Permaswap’s token PSN will serve liquidity by providing incentives to high-quality liquidity and exchange services.
There are two roles in Permaswap Network: Router Node and LP Node. Router calculates the price according to the curve information provided by LP, and LP signs orders according to its curve.
Unlike the traditional EVM AMM DEX, Perma prices do not need to be repeated across all nodes. Orders completed using Permaswap are perpetuated on Arweave, and Node generates consensus based on the on-chain data. Each conversion of Uniswap requires calculations on thousands of GETH nodes, reducing the scalability of Uniswap and other similar on-chain smart contracts.”
Do you have any partners involved in this launch? What roles do they have?
Yes, Huobi Incubator, security company Safeheron, as well as our early-stage investor. Arweave and SCP (Storage Consensus Paradigm) bring a new solution to performance, gas fee cost, and user experience.
Huobi Incubator was also profoundly aware of this and decided to deepen the bond with the Arweave ecosystem to help build it further. We will carry out in-depth cooperation, including hackathons, WEB3 project incubation, etc. In this process, the everFinance Team will also provide more SCP development tools to facilitate WEB2 developers to have new ideas and innovations in WEB3.
Safeheron is a very rigorous and professional cryptography team committed to MPC research and development. They helped us resolve some significant issues: the threshold algorithm was inefficient for key sharding. The RSA key used by Arweave wallets has been an obstacle for DAO in managing AR assets. EverPay, the financial infrastructure we built, currently uses Golang’s RSA threshold algorithm for key sharding, but this algorithm is inefficient and takes up to 30 minutes to compute a key sharding. Our degree of decentralisation is hampered by inefficient computing.
Safeheron provides a C language version RSA threshold algorithm, which will significantly improve the performance of key sharding, and the key sharding calculation will be reduced from 30 minutes to 1 minute. At the same time, Safeheron will provide TEE solutions that guarantee the privacy and security of RSA key sharding. This will make DAO management of AR assets easier to develop and use. EverPay will quickly transition to DAO governance on top of secure and efficient cryptography algorithms and pave the way for Permaswap payment settlement security.
How many pairs will be active at the start?
We will give priority to $AR and PST transaction pairs. Thanks to the cross-chain feature of everPay, we will also support ETH, USDC, USDT, and other tokens. Like Uniswap, any Token supported by Permswap can be exchanged with each other.
Can you tell us more about the liquidity mining mechanism?
The first Phase of Permaswap is Precursor, inspired by a very popular video game called Halo. Yes, once Precursor Phase is released, we will immediately start liquidity mining, however there is an access threshold for mining in this phase. Only NFT holders who are participants of everPay NFT Auction can join the Network and register as LP Node for the first liquidity mining. As mentioned above, PSN will serve liquidity, so 50% of PSN will be used to incentivise liquidity.
What is the yield offered for liquidity providers?
Early liquidity mining would be offered in stages by trading pairs, offering different rates of return based on the risk factor of different trading pairs. If PST/USDC is a token with a high risk of market-making (volatile loss), it may offer more than 500% annualised return. AR/ETH faces much lower impermanence losses than PST/USDC and therefore offers a lower rate of return, such as 100% APR.
To secure the launch of the Permaswap Network and create sufficient liquidity, 50% of the tokens will be distributed to the community through a mining mechanism.
Liquidity mining is divided into two phases: cold start and community governance. During the cold start phase, the mining pool rewards will be determined and provided by the core developer team. Once the tokens have a certain level of liquidity, the mining pool rewards will be determined by community voting.
Can you tell us more about PSN?
To guarantee network availability and provide stable and reliable trading orders, LPs need to stake PSN tokens when they first join the network. The staked PSN tokens from the LP nodes that refuse to provide signatures in bad faith will be forfeited, and when the number of PSNs falls below a threshold, the node will be forcibly removed by the network.
Router nodes can extract transaction fees within the network, there should be a reasonable fee guideline in the network, and Routers need to follow the protocol guideline for order aggregations and fee extractions. At the same time, Routers need to share LP information with each other to allow users to get the best offer in the network.
When a Router fails to interact according to the network protocol and maliciously provides incorrect LP information to another Router, it can lead to reduced availability of the network. That being said, Routers need to stake PSN tokens. When Routers violate the protocol, the staked PSN tokens will be forfeited. Therefore when the amount of pledged PSNs from Routers falls below the threshold, the node will be forcibly removed by the network.
- Voting governance
PSN will be used for a variety of governance functions, such as network protocol adjustments, feature upgrades, voting backed by the token, etc.
- Earnings buyback
Router nodes can add additional fees when aggregating transactions in the network. A portion of that fee will be used for a token buyback. Those buyback tokens will go into the ecosystem fund. Router nodes will not set specific fees in the early stages of the network.
- Other functions
Permaswap Network is a high-performance exchange network serving WEB3 and the PSN token will also be used in more community scenarios such as forums, Discord, etc. in the WEB3 ecosystem.
Which wallets does it support?
It supports all Arweave and Ethereum wallets. These AR Wallets include ArConnect, Bitkeep, Mathwallet (AR Wallet), etc. ETH Wallets include MetaMask and imToken.
Will it support all the PSTs?
Technically, Permaswap supports all PSTs, but it will not be fully liberalised in the early days. PST may have different versions and implementations, and an unaudited variant contract will be at risk. The tokens that will be supported in the future may be voted on by PSN holders. These tokens that are voted in must also be rigorously audited to avoid security risks.
Can we bridge liquidity from other chains?
EverPay, of course, is a cross-chain financial infrastructure that already supports multiple public chains like Arweave, Ethereum, and Moonbeam, with more to come. All everPay-supported public chains and tokens have the opportunity to create liquidity in Permaswap and provide the best DEX experience for users.
Are there some elements of centralisation?
The roads of Rome were not built in a day. Permaswap will go through a process from trustless to permissionless to complete decentralisation. Permaswap Network is divided into four stages, namely, Precursor, Forerunner, Prophet, and Flood.
In the Precursor stage, the trustless part is realized: atomic exchange, multiple counterparties do not need to trust each other. In an everPay bundle transaction, if a sub-transaction fails, the whole transaction will be rolled back.
The Forerunner phase implements permissionless: in the Precursor phase (reasons for network testing and stability), NFT must be held in order to provide liquidity and become LP Node. When talking about the Forerunner, any person or organization can become an LP Node by pledging PSN.
The final Flood phase is fully decentralised, and Permaswap will be fully governed and evolved through PSN.
For even more details, please check their whitepaper. As you can suspect, Permaswap’s design is rather complex, so the more minds are dabbling into its intricacies, the better. Let’s use the months left until the grand opening to study the proposed protocol and deliver our feedback to the everFinance team. We’ll shortly share our thoughts about it in a dedicated article.
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