How SushiSwap’s “next Generation AMM” helps users to tailor their own liquidity pools
The SushiSwap developer team announced that it has built the next-generation automated market maker (AMM) for its decentralized exchange (DEX) platform that runs on the Ethereum (ETH) blockchain.
Dubbed Trident, the new AMM protocol design, which will function as a base layer for the DEX is set to maximize capital efficiency by adding multiple pool types while minimizing some of the siloed liquidity problems.
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A variety of pool types
Unlike the majority of decentralized finance (DeFi) protocols, which typically rely on a constant product pool, SushiSwap’s next-generation AMM “is intended to be, at minimum, a superset of all AMM pool designs, by adding multiple pool types to provide relief for many of the pain points experienced due to the siloed liquidity problem and to protect users from price impacts and other risks that are faced by cryptocurrency holders,” according to the developers.
A Trident has 3 prongs, which represent the 3 new pools that we are adding to our original constant product pool (50-50):
i. Hybrid Pools (like-kind assets in 1 pool, reduces price impacts)
ii. Weighted Pools (supports 8 tokens at once)
iii. Concentrated Liquidity Pools
— SushiChef (@SushiSwap) July 20, 2021
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Trident has three prongs, representing the 3 new pools that are being added to the protocol’s original constant product pool, which is made up of two assets paired at an equal value match.
Intended for swapping only “like-kind assets at reduced price impacts,” based on a stableswap curve, “hybrid pools” will enable users to include up to 32 assets in a single pool, while avoiding interference from other market factors.
“Weighted pools” that can support up to eight tokens at the same time will permit “different weight types,” meaning that an equal value match between the traded assets is not required.
Finally, the “concentrated liquidity pools” are included to enable liquidity providers (LPs) to better scope their liquidity provisioning and maximize the share of revenue they receive from the platform as they will allow users to select the token price range in which they wish to receive swap fees.
Not just a fork
Built within SushiSwap’s token vault system BentoBox that enables passive yields on deposited funds, the protocol’s new set of next-generation AMM remains open-source.
The new announcement was used in an effort to transcend the DEX’s “just a fork from Uniswap” label.
The addition of a variety of new pool types is set to provide users with more freedom with their investment management while enabling them to “choose pools that best suit their risk profile.”
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