Colswap by Team Col - A DEX that compensates for Impermanent Loss with Algo Stablecoin

Project Name: Colswap
Project Track: DeFi
Team Name: Col
Team Member(s): 3 (@icomehere & @longest @col)
HackerEarth Project Link: https://devpost.com/software/colswap?ref_content=user-portfolio&ref_feature=in_progress
Project Goal: Use the simplest way to solve the problem of Impermanent Loss.
Project Value: Exploring ways to solve the problem of Impermanent Loss with algorithmic stablecoins
Project Info:
Colswap is a dex that compensates for Impermanent Loss with Algo Stablecoin.
COL is the governance token of colswap, and it is also an algorithmic stablecoin like AMPL.
Loss of 1U, compensation of 1 COL.
GitHub - icomehere/Colswap: A DEX that compensates for Impermanent Loss with Algo Stablecoin.
Project Website: http://18.139.209.82/
Project Test Instructions:

  1. Log in to the tronlink plug-in wallet, enter the website: http://18.139.209.82/, and connect to the wallet (TRON Shasta test network). If the wallet is not connected normally, click the “Unlock Wallet” button in the upper right corner (sometimes it displays FALSE).
  2. Click “GET WTRX” and “GET USDT” in the upper right corner to get wtrx and usdt test tokens (to get wtrx, you need to mortgage trx), and then click “APPROVE ALL” to execute 5 transactions to complete all authorizations.
  3. Add wtrx and usdt tokens to the “Pool” page for market making, perform transactions on the “Swap” page to change the wtrx price, then exit the market making ,you will obtain COL to compensate for impermanent losses.
    Example:
    a、Alice add 1000WTRX and 1000USDT to the WTRX/USDT pool for market making,now the price of WTRX is 1USDT;
    b、Suppose after some time, the price of WTRX becomes 0.25USDT,Alice have 2000WTRX and 500USDT in pool,her WTRX increased by 1000,her USDT decreased by 500,the Impermanent Loss is 250USDT(500-1000*0.25);
    c、Alic withdraw her asset,she will receive 2000WTRX、500USDT and 250COL.
    Project Details: https://www.youtube.com/watch?v=5GYSj6Xdg3U
    Smart Contract links:
    COL:TRONSCAN | TRON BlockChain Explorer | 波场区块链浏览器
    Router:TRONSCAN | TRON BlockChain Explorer | 波场区块链浏览器
    Factory:TRONSCAN | TRON BlockChain Explorer | 波场区块链浏览器
    WTRX:TRONSCAN | TRON BlockChain Explorer | 波场区块链浏览器
    USDT:TRONSCAN | TRON BlockChain Explorer | 波场区块链浏览器
    COL_USDT pair :TRONSCAN | TRON BlockChain Explorer | 波场区块链浏览器
    WTRX_USDT pair:TRONSCAN | TRON BlockChain Explorer | 波场区块链浏览器
    Project Milestones:
    1.Initial phase and process ideas(Done).
    2.Develop Minimum Viable Product (MVP)(Done).
    3.Design Token Economics
    4.Optimization.
    5.Launch.
6 Likes

Welcome to Grand hackathon season 6.

I appreciate your interest in the project aiming to solve Impermanent Loss with algorithmic stablecoins. The approach of Colswap to compensate for Impermanent Loss with Algo Stablecoin COL is innovative and has the potential to address this common issue faced by liquidity providers in decentralized exchanges.
Wishing you all the best of luck buddy.

1 Like

Welcome to season 6 team :sparkles:

Thank you so much for your encouragement!

Thank you so much ! :smile:

You are welcome, thanks for giving examples. It helps me to understand it better. It is nice idea but my worry is about the price of your token COL, the compensation can be insignificant of the price of the token is very low. but all the same you have tried to compensate so that’s fine.

Thanks for pointing out that this is indeed a problem, and it is also the problem we will focus on solving in the next step:token economics.

1 Like

Alright, thank you :pray:

How are COL minted? How are they backed? If people get them for free to compensate the impermanent loss, they’ll dump it to get back usdt. How are you going to push the price up? If you can’t, the token will just depeg and become illiquid. Please enlighten me cause I don’t understand your plans to be sustainable (let alone profitable) :pray:t2:

3 Likes

Thank you for your question. This is indeed a difficult question. We only have a general idea now:

  1. Rebase mechanism, 1col is initially anchored to 1usdt;
  2. The anchor value push-up mechanism reduces the supply of col. For example, after a period of time, the anchor value becomes 2usdt, and then 4usdt. It used to require 1col to compensate for the impermanent loss of 1u, but now it only requires 0.5col, 0.25col.
  3. Curve’s ve mechanism creates demand for col
  4. Explore more application scenarios of col and increase demand

Welcome to Season 6, quite interesting reading through your offering from start to bottom. I clearly understand that Colswap aims to address impermanent loss in decentralized exchanges by using an algorithmic stablecoin (COL).

How will the token economics be designed to ensure stability and incentivize participation?

Welcome to the Hackathon, how serious minded are you towards the security and transparency of your platform, thank you

Based on the project overview you provided, Colswap is a decentralized exchange (DEX) that uses algorithmic stablecoins to compensate for losses. This idea is excellent and highly innovative, addressing a common problem faced by liquidity providers in global decentralized exchanges. However, I would like to understand the following points about your project and look forward to your reply:
Challenges of Algorithmic Stablecoins: Algorithmic stablecoins face significant challenges in maintaining value stability, especially under market stress or extreme conditions. Your project relies on the COL algorithmic stablecoin to compensate for impermanent loss, which may be impacted by these factors. What contingency plans do you have in place if stability issues arise?
Compensation Mechanism: The project uses COL compensation to address impermanent loss, and the effectiveness of this mechanism depends on COL’s market performance and acceptance. If COL’s value is unstable or there is insufficient market demand for COL, this compensation mechanism may not achieve the expected results. What measures do you have in place to address this situation?

Thank you for your attention. Regarding the stability of col price, we will consider using rebase, ve, or even ve(3,3) mechanisms to ensure it. Of course, this is just an experiment and may not be successful. Regarding incentives, in addition to receiving col to compensate for impermanent losses, market makers will also receive part of the transaction fee.

1 Like

Thank you for your attention. To be honest, I haven’t considered security issues much yet, but I guarantee that the code will be audited before the mainnet goes online. Regarding transparency, all our code will be open source.

Thank you for your attention. The long-term stability of COL price is indeed the key to all problems. We will consider using rebase, ve, ve (3, 3) and the repurchase mechanism (using transaction fees) to ensure the stability of COL. Of course, if COL is temporarily unanchored, it shouldn’t be a big problem. After all, no DEX has promised to compensate for the loss of uncertainty. We are just getting started, and we will consider the best strategy based on development later.

Thank you for your detailed response. You mentioned several mechanisms to ensure the stability of COL, such as rebase, ve, ve(3,3), and a buyback mechanism using transaction fees, which are very helpful. However, I would like to understand more about the following aspects:

  1. Detailed Mechanism Explanation: Could you provide more detailed explanations on how these stability mechanisms operate in practice, especially under extreme market conditions? Understanding how these mechanisms work will help us better assess the risks and potential of COL.
  2. Measures for Temporary De-pegging: You mentioned that temporary de-pegging of COL is not a major issue, but I am curious about what specific measures you have in place to quickly address and correct such situations? This is an important safety assurance for investors.
  3. Enhancing Market Demand and Acceptance: Regarding the market performance and demand for COL, do you have any specific strategies or plans to enhance its market acceptance and demand, especially in times of value instability or insufficient market demand?
    I look forward to your further clarification so that we can fully understand COL and its role in DEX project.
1 Like

That sounds like a thoughtful approach to addressing price stability and providing incentives for market makers.

In terms of incentives, offering part of the transaction fee to market makers is a common and effective strategy to attract liquidity providers. Have you considered any specific percentage or mechanism for distributing these transaction fees?

Thank you for your question. Your question has also promoted our thinking. However, there is currently no clear mechanism to solve this series of problems. We will continue to think and try, and if there is a good solution, we will announce it as soon as possible.

Thank you for your attention. Regarding the proportion of transaction fees allocated to LPs, our temporary idea is 50%