Introduction to the concept of QuickSwap and its operation mode
QuickSwap is an automated market maker on the Polygon network, which is a copy of Uniswap, and both use the same liquidity pool model. Users add token pairs to the liquidity pool and earn transaction fees from users who use the pool to exchange tokens.
The Polygon network has fast settlement speed and low fees, so QuickSwap is widely favored. QuickSwap is also compatible with the Ethereum blockchain to exchange ERC-20 tokens. However, users also face the risk of impermanent loss.
QuickSwap’s cryptocurrency is called “QUICK” and can be easily bought and sold on Binance. In addition, you can also use QuickSwap's liquidity pool to exchange other tokens for QUICK.
Automated market makers (AMMs) such as QuickSwap are very popular in the decentralized finance (DeFi) space. The Uniswap model has become a standard across different blockchains and Layer 2 platforms. The function of QuickSwap is the same as that of Uniswap, the difference is that the former relies on the Polygon network instead of Ethereum. QuickSwap is a fork of Uniswap, but the main difference between the two makes QuickSwap win the favor of some users.
What is QuickSwap?
QuickSwap is a fork of Uniswap, created by Nick Mudge and Sameep Singhania on the Polygon blockchain platform. It uses the Automated Market Maker (AMM) model to create a decentralized exchange (DEX) for users to exchange tokens. QuickSwap has no order book, and users trade in pools of token funds called "liquidity pools".
Users can transfer ERC-20 tokens from Ethereum to Polygon, and trade any token pair through QuickSwap as long as there is a corresponding liquidity pool. As long as token pairs are provided, new liquidity pools can be established and transaction fees can be earned from other users.
The interface, operation look and feel and user experience of QuickSwap are almost the same as those of Uniswap. Users do not need to register or complete any KYC (identity verification) process to exchange holding tokens. Just link the wallet to the platform and pre-deposit MATIC to pay the transaction fee. QuickSwap is also an open source product, using Uniswap's audited code to obtain a certain degree of trust and security.
What is Polygon (MATIC)?
Polygon (formerly known as "MATIC") is an infrastructure for creating Ethereum-compatible networks. These blockchains can also interact with each other to build an interconnected blockchain Layer 2 ecosystem. The Polygon network is the official sidechain of the project, using a proof-of-stake consensus mechanism to ensure security.
The rapid expansion solution and low gas cost make the Polygon network attract many users. Transaction fees are paid in MATIC tokens. The network is compatible with the Ethereum virtual machine, and developers can fork existing DApps (decentralized applications) (such as Uniswap forking out of side chains).
Why not use Uniswap, but choose QuickSwap?
Many users choose Polygon because of its fast transaction speed and low fees. Liquidity providers and swappers can use Uniswap's audited code and enjoy the benefits of the ERC-20-enabled Polygon network. A big benefit of this move is that ERC-20 tokens can be traded using a simple blockchain bridge, avoiding Ethereum’s high fees. Therefore, QuickSwap achieves a balance in the three aspects of Ethereum compatibility, ease of use and price advantage.
How does QuickSwap work?
QuickSwap uses an automated market maker model to create a liquidity pool for swapping tokens. Instead of trading as a maker or taker, users interact with smart contracts. Liquidity is provided by simply depositing a pair of tokens of equivalent value.
Liquidity providers are rewarded with Liquidity Pool (LP) tokens as a receipt for their share in the pool. When the tokens are exchanged, these LP tokens are also destroyed. These tokens can also be provided to third parties for liquidity mining. Earnings are continuously reinvested in the pool, generating compound interest.
QuickSwap's AMM model rewards all liquidity providers with 0.3% of the fee, and distributes them according to each person's proportion in the liquidity pool. Token prices are not determined through order books, but by a "constant product market maker model".
Let's take the ETH/DAI liquidity pool as an example. ETH is variable x and DAI is variable y. According to the "constant product market maker model", x is multiplied by y to obtain a constant value k.
x * y = k
Liquidity pools provide exchange rates. In this example, 3000 DAI(y) can be exchanged for 1 ETH(x). Inject 3,000 DAI into the fund pool and withdraw 1 ETH. The supply of DAI increases and the supply of ETH decreases. Since k is constant, the price of ETH increases accordingly. In other words, users buy ETH with DAI. As ETH withdraws from the fund pool one after another, its price will continue to rise compared to DAI. The figure below shows the quantitative relationship of the two tokens.
What is impermanent loss?
Liquidity providers face the risk of impermanent losses. If the token price changes compared to when it was staked, the dollar value of the eventual redemption will decrease. Note that this can happen if the price goes up or down. Losses are impermanent as losses are incurred only when funds are withdrawn from the liquidity pool.
If the price returns to the initial level, the impermanent loss is reversed. Of course, dividends sometimes outweigh impermanent losses. To learn more and explore the math behind impermanent loss, read the What is impermanent loss guide.
How does QuickSwap profit?
Unlike centralized exchanges, QuickSwap does not make money by charging users. Liquidity providers are the ones who actually earn transaction fees. Like Uniswap, it charges a 0.3% fee for swapping tokens using liquidity pools. Users can claim the earned transaction fees at any time, or even reinvest, and then receive fees in proportion to liquidity.
How to use QuickSwap?
QuickSwap can be accessed through a desktop web browser or a mobile device. The following link must be used: quickswap.exchange. Choose a liquidity pool, invest tokens in it, and earn fees easily.
Access the quickswap.exchange page through a desktop or mobile browser;
Link wallet. If you need to use a desktop browser plug-in wallet or a mobile wallet app, MetaMask and Trust Wallet are both good choices. In addition, the wallet should also support the Polygon network.
Click the [Exchange] tab to start exchanging tokens.
Select the token you want to exchange and get. In this example, we exchange MATIC for PBNB.
Click [Exchange].
Preview the transaction in the pop-up window, and then confirm the transaction request in the personal wallet.
QuickSwap (QUICK) Token
QUICK is an ERC-20 token and the governance token of QuickSwap, which will be launched in February 2021. 90% of the total token supply is rewarded to liquidity miners, allowing liquidity providers to become platform shareholders. QuickSwap adopts a governance model common to other DeFi projects, including Uniswap and PancakeSwap. Holders of QUICK can create and vote on proposals for new features or changes to the platform.
Summarize
QuickSwap is a new way to trade tokens in a decentralized manner. Compared with Uniswap or other Ethereum network AMMs, you only need to use a Polygon address and a small amount of MATIC tokens to trade ERC-20 tokens, and it is faster and more cost-effective. However, this feature is difficult to attract users in the long run. In the face of the upcoming Ethereum 2.0, QuickSwap may fall behind in terms of fees and speed.
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