Valhalla Capital Backs Platypus’ Avant-Garde StableSwap
A Beginner’s Introduction
With Platypus’ imminent Beta launch on January 14th, 2022, we thought it would be helpful to share a brief breakdown on Platypus’ new stablecoin swap platform on Avalanche.
If you are a crypto investor, you are certainly in for an adventure! While most investors seek the thrill derived from the volatility, some risk-averse investors are deterred by the lack of liquidiity. Although several traders are willing to take on higher risks for a higher rewards, they still steer clear of some illiquid assets. Currently, stablecoins are widely used to hedge against speculative assets such as non-stablecoin cryptocurrencies and to provide a safety net.
Centralized crypto exchanges generally tend to use an order book model that is steered by the bid and ask prices. The bid price refers to the highest price that a buyer is willing to pay for an asset and the ask price refers to the minimum price at which a seller is willing to sell the asset. Decentralized finance (DeFi) has revolutionized trading in cryptocurrencies through the use of liquidity pools. These liquidity pools serve as the foundation for decentralized exchanges (DEX). Contrary to order books, liquidity pools are collections of funds secured in smart contracts. These liquidity pools are now common among stableswaps as well.
Are Existing StableSwaps Problematic?
The existing stableswap model has a complex design that results in higher slippage, lower scalability, and poor user experience. Currently, Automated Market Makers (AMMs) use closed liquidity pools, in which liquidity is not shared among other pools. As a result, a liquidity fragmentation problem arises. This also leads to higher slippage, which refers to the difference between the expected price and the actual price at which the trade is executed. Aside from high volatility, poor liquidity and low trading volumes, a significant difference between the bid-ask price is also an indicator of high slippage.
Equilibrium in the existing stableswap is achieved when all the tokens in the pool have the same liquidity. The equilibrium condition is determined by a constant mathematical formula such that the total value of one token is equivalent to the total value of the other token in the pool. Consequently, the least popular token in the pool acts as an impediment and thwarts the scalability of the entire liquidity pool.
Meet Platypus: Revolutionizing StableSwaps
Platypus has launched a new mechanism that has redrafted the current, closed liquidity pool model for stableswaps. this one-sided AMM plans to revolutionize DeFi with this new stableswap protocol in the Avalanche ecosystem. Platypus aims to achieve better capital efficiency, lower slippage, higher scalability, and enhanced user experience with this new DEX.
The closed liquidity pool model has led to liquidity fragmentation. Platypus has scrapped this design and opted for an open liquidity pool model instead, wherein liquidity is shared among separate pools. This in turn has reduced slippage from 0.05% (in a closed liquidity pool model) to 0.01% in Platypus’ mechanism.
In current state stableswaps, a token with a significantly lower supply has the potential to bring down the equilibrium of the entire pool. Platypus’ liquidity pool is more flexible as the equilibrium is determined by a coverage ratio (the ratio of assets to liabilities), wherein all the tokens must have the same coverage ratio instead of the same amount of liquidity. The assets in the pool are therefore able to scale naturally on the basis of demand and supply. As such, single-sided tokens can be conveniently withdrawn from the pool without hampering the pool’s composition.
Platypus has stated that its model has a risk of “withdrawal arbitrage”, where a person owning a significant amount of the pool can generate an arbitrage profit simply by fiddling with the coverage ratio. The team has developed a mechanism to counter this problem such that the withdrawal fees will be equal to the maximum possible profit that can be obtained from the withdrawal arbitrage “attack”.
Platypus has masterminded an AMM that is based on Asset Liability Management (ALM), which is conducive for stableswaps. The protocol is implemented through smart contracts that focus on high-level security, censorship resistance, self-custody and maximum capital efficiency. It currently accepts dollar-pegged stablecoins such as the USD coin (USDC), Tether (USDT), Dai (DAI), and Magic Internet Money (MIM).
Platypus was recently listed on Trader Joe. You can now swap its token in the trading pair PTP/AVAX for the first time ever! The Platypus community is growing rapidly and its user base has surpassed 10k members across Twitter, Telegram and Discord. Platypus is leaving no stone unturned to create interest among users.
Supporters
With such avant-garde and pioneering designs underway, you can probably guess that Platypus is very appealing to investors. Platypus recently received $3.3 million in a funding round led by Three Arrows Capital and DeFiance. Moreover, other investors such as Avalaunch, CMS Holdings, and Hailstone made significant contributions in the funding round as well. On 9 November 2021, Platypus put to sea its alpha mainnet, which set the limit for total value locked at $10 million and filled it within 15 minutes. Zealous traders are awaiting the launch of the beta version of the mainnet.
Valhalla Capital is delighted to back Platypus, which is challenging the status-quo and bringing out such a ground-breaking mechanism with stableswaps. It is now quite evident that Platypus has immense potential and this partnership will be extremely synergistic for both parties. Although Platypus’ founder, Mr Duckbill, hasn’t revealed the secret behind why he named the AMM ‘Platypus’, he has shown faith in the company and has promised more surprises in the near future. In a recent interview, he also mentioned his fascination with gamification and the metaverse. We are excited to see what the future has in store; in the meantime, we are excited about this latest innovation in stableswaps.
If you’re looking to dive deeper or want to stay up-to-date, use the links to Platypus’ official account below.
Website: https://platypus.finance
Twitter: https://twitter.com/Platypusdefi
Medium: https://medium.com/@Platypus.finance
Additional Links: https://linktr.ee/platypusdefi
