KyberSwap has made a name for itself in the decentralized finance (DeFi) space due to its novel offerings. Following this same path, the DeFi protocol has launched another protocol titled KyberSwap Elastic. This is a product that builds on the existing offerings of the KyberSwap Classic (formerly known as KyberDMM) to bring a more comprehensive platform for users to access concentrated liquidity and earn on a flexible schedule.
This new product is part of KyberSwap’s efforts to meet the needs of the ever-changing DeFi landscape and meet the needs of traders and liquidity providers (LPs) across the market. It is a culmination of all of the effort that has been put into bringing about the DEX aggregator’s latest protocol.
KyberSwap Classic: Where It All Started
KyberSwap Classic was the first protocol from Kyber Network to implement dynamic market makers. Back in 2021, Kyber Network introduced the world’s first-ever dynamic market maker (DMM). It helped move liquidity providers/traders towards an alternative for automated market makers (AMM) across the DeFi market, which usually left traders vulnerable to high slippage, and liquidity providers were always at high risk of impermanent loss.
KyberSwap’s Dynamic Market Maker (DMM) protocol provides a new liquidity protocol that was designed for retail liquidity providers and token teams. This means that fees become higher during periods of high market volatility and lower during low market volatility as a way to encourage trading and volume regardless of the market situation. This allowed for extremely high capital efficiency and flexibility for users in decentralized finance.
In addition to its fee-optimizing DMM protocol, KyberSwap Classic has an Amplification (AMP) factor, which allows higher capital efficiency compared to typical AMMs. It does this by allowing liquidity providers to set a customizable amplification factor (AMP) for a token pair, which can improve slippage up to 200X times better than in AMMs for stable pairs. It also took this a step further with the AMP liquidity that took into account the AMP factor also set by the LPs and the token inventory available in the pool. All of the trade volumes are then executed through the selected pool, as well as all of the fees actualized from trading activity.
As a permissionless protocol, users of KyberSwap Classic can also easily create or join liquidity pools easily.
KyberSwap Elastic: The Future
KyberSwap Elastic is the newest protocol to bring added advantages to the KyberSwap ecosystem. Where KyberSwap Classic allows liquidity providers to maximize earnings through the use of AMP factors and dynamic fees, KyberSwap Elastic takes it one step further with ‘Concentrated Liquidity.’
As a tick-based AMM, KyberSwap Elastic allows liquidity providers to be able to supply liquidity to an ‘Elastic pool’ using a custom price range of their choice. LPs can choose to set a very narrow price range or a wide one that accommodates more volatile tokens and markets.
When LPs set a narrow price range, the liquidity is used more effectively since it mimics the higher levels of liquidity, leading to better slippage, volume, and earnings. This works best for stable and correlated pairs such as USDC-DAI.
Setting a wider prince range helps LPs to ensure that uncorrelated token pairs remain active. An example of this is a USDC-ETH pair during periods of high volatility. By setting it high, the USDC-ETH pair remains active even when there are wide swings in price.
There is simply no limit to the price that LPs can set as KyberSwap Elastic has a 0 to infinity range. These concentrated pools give flexibility to LPs to manage their capital and adjust their risk in a way that brings rewards for them.
As opposed to LP tokens, liquidity providers for KyberSwap Elastic will receive NFTs to represent their liquidity positions. These NFTs can be staked on the applicable farms in KyberSwap liquidity mining programs for additional incentives.
Other advantages of KyberSwap Elastic are as follows;
Multiple-Fee Tiers:
KyberSwap Elastic has a 5-fee tier that allows LPs to select a fee tier that they want, based on how correlated the token pair they are providing liquidity for is. It ranges across 0.008%, 0.01%, 0.03%, 0.04%, and 1%. It provides LPs with a high level of flexibility that is unattainable in other decentralized exchange protocols. More fee tiers will be added in the near future.
Auto-Compounding Fees:
All of the fees earned by the LPs are automatically reinvested into the pool. This way, LPs are able to earn more via compounding. Users are able to withdraw their earned tokens at any time.
Just-in-Time (JIT) Attack Protection:
KyberSwap Elastic also possesses improved security features to protect traders and liquidity providers. The Just-in-Time (JIT) attack protection feature is an anti-sniping feature that locks in all of the earnings of LPs. The tokens are then vested according to the liquidity duration, protecting them from snipe attackers who try to put in and remove liquidity quickly to earn large trading fees without risking impermanent loss.
Other KyberSwap Products For The Full Experience
KyberSwap has been one of the most innovative in the space, and this shines through in its impressive suite of products available. Not only has KyberSwap recently launched Discover, a first-of-its-kind intuitive tool for traders to discover tokens before they trend, but KyberSwap also offers trading tools and features such as Dynamic Trade Routing, as well as Pro Live Charts that allow users to analyze the charts of various tokens accurately, etc.
Learning is also available for users on the platform in the form of tutorials and guide prompts to make their DeFi journey. KyberSwap also has a How to DeFi 101 series to provide objective, educational resources for those looking to learn about the DeFi space.
Most notable has been the adoption of KyberSwap by other decentralized finance protocols to enhance liquidity on their platform and benefit their ecosystems. Earlier in August, Polygon DeFi protocol Lido Finance had partnered with KyberSwap Elastic to enhance liquidity on the blockchain, providing up to $120,000 in liquidity mining rewards with the partnership.
Other notable platforms that have adopted the KyberSwap Elastic protocol to enhance their offerings are Avalanche staking platform BENQI and Avalanche cross-margin lending protocol Yeti Finance. Both protocols recently launched concentrated liquidity yield farming on the KyberSwap platform.
KyberSwap powers 100+ integrated projects and has facilitated over $10B worth of transactions for thousands of users since its inception. Currently deployed across 12 chains, including Ethereum, BNB Chain, Polygon, Avalanche, Fantom, Cronos, Arbitrum, Velas, Aurora, Oasis, BitTorrent, and Optimism.