Last updated: Aug 20, 2023
Terraswap is a Uniswap-inspired automated market-maker (AMM) protocol implemented with smart contracts on the Terra blockchain. Launched in November 2020 by DELIGHT LABS, the platform enables a decentralized on-chain exchange for the various assets involved in the Terra ecosystem. For example, Terraswap supports bAssets from Anchor Protocol and mAssets from Mirror Protocol, both projects built on Terra.
To enable users to exchange assets directly on-chain, Terraswap utilises automated markets for pairs of tokens also referred to as pools. These pools maintain balances of both assets comprising them and allow users to provide liquidity in exchange for LP tokens. Terraswap pools make up the values of the tokens contained in them through a constant product invariant formula: XY=k, where X refers to the current balance of the pool’s source asset, while Y is that of the target asset. The algorithm behind preserving the constant product invariant manages to determine the proper value of a swap by taking into account the trader’s offered asset. The platform can execute trades only with the current balances of the pool and the amount of incoming tokens by encoding the market price of a pool’s target tokens divided by the source asset.
The Terraswap app creates automated markets for pairs of tokens (CW20 standard based on CosmWasm or native Terra coins like UST) called pools, which enable users to exchange one asset for the other directly on-chain. Pools maintain balances of both assets, to which users can provide liquidity in exchange for reward-bearing LP tokens.
On Terraswap platform, LP commission is fixed at 0.3% and is charged on each swap from the trader’s received asset in the form of a Terraswap fee. LP commission is added to the corresponding liquidity pool as a fee for liquidity providers.
TerraSwap does not have its own token yet.
Terraswap was created by DELIGHT LABS, which also runs validators for NuCypher, Orbs Network, SKALE Network, Oasis Labs, and Terra. According to the information on the website, the Terraswap team consists of six people, five of them are software engineers and one is a product designer. Although they are claimed to have extensive experience in decentralized platforms, information about past development experience for large projects in the blockchain industry is not provided.
There are no audits Terraswap has published so far.
Currently, Terraswap covers mirrored assets of Mirror protocol, as well as Anchor protocol, Pylon protocol, LOTA, DPH, and Terra stablecoins.
The team plans to improve its interface, including adding a dashboard feature, in the near future. They also plan to add support for new wallets and increase the number of supported token pairs.
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