Monti Has Enable Liquidity Staking On It VeChain DEX, Vexchange Decentralized Exchange
Monti Has Enable Liquidity Staking On It VeChain DEX
It has been about three months since Monti launched a decentralized exchange for VeChain. The Monti launch marked a milestone as the first DApp on VeChain. Since then, the exchange has conducted over 5,250 mainnet transactions. In the process, about 245,000 VTHO have been burned. This exchange will let its users connect with the Web3 Wallet, which can be Comet or Arkane. It will help to ensure that all transactions are fully decentralized and trustless. Besides that, users have the option of running the interface locally.
Liquidity Provided By The Community
This exchange will not have an order book. Instead, there will be liquidity pools, which will be used to set prices between currencies. Essentially, a given market (VTHO/VET) will have two reserves. One will be for the VET and the other for the VTHO. The two reserves will be presumed to be equal in value. Thus, Reserve A/Reserve B = Price.
The prices change after each trade when users withdraw or add from a reserve. For instance, buying 100 VET will take out 100 VET from the reserve. At the same time, it will add 1000 VTHO. The price of VET will rise since there is now less being held. To reduce price fluctuation, users will need to stake extra funds that offer better liquidity to traders.
With time, this could lead to a situation where developers or institutions buy a year’s worth of the VTHO. This can be done with slippage of less than 0.1% and everything takes place in a single transaction on-chain.
Incentivizes For Providing Liquidity
Since the DEX relies on liquidity provided by the users, it requires an incentivize mechanism to get users to provide the liquidity. To achieve the Vexchange distributes some of the fees from the exchange to those who provide liquidity. This assists the DEX to grow reserves, which ensures the size of orders is always growing. With time, the swap fees will most likely grow. Despite this, the exchange plans to continue to work to ensure they maintain the balance between the incentives they offer and the fees.
Active Trading On The DEX
The exchange decided that it would launch liquidity staking before enabling full functionality for traders. For the first week or so, users who can only stake liquidity and trading will not be supported at the front end. This will be a grace period where the exchange will accumulate some base level liquidity. After that, the DEX will allow active trading. It will limit slippage from the start as the reserves grow.
It is worth noting that the project is still in the beta stage. Thus, issues might arise at the front end. Users may assist the team by reporting issues. To encourage liquidity staking early on, the DEX will send more tokens to various markets. It will also be so for the market-making activities. This will ensure that DEX prices are stable as front-end trades are disabled. Market making activities will generate a fee that is automatically distributed to those who stake via a pro-rata mechanism.