DEXs are supposed to function as the heart of the asset flow within the ecosystem. But most general DEXs on the zkSync ecosystem are based on the traditional CPMM model,
While this method has the theoretical merit of being able to respond to swaps happening in all price ranges (zero to infinity), in reality, most of the liquidity provided by the LPs is not actually used for the swaps.
Such a low liquidity utilization rate has its downsides - limiting the swap fee income of LPs and tightening the asset flow within the ecosystem. What’s worse, this drives down the LP yields due to small swap volumes and eventually causes the LPs to leave the platform in an already downward-facing market situation.
With concentrated liquidity, deeper liquidity is used for swaps.
zkSwap is determined to resolve this issue by providing concentrated liquidity, increasing the utilization rate. When liquidity is added in concentration to particular price ranges, more liquidity will be activated and utilized for actual swaps. This will bring larger revenue shares for LPs and facilitate the overall asset flow throughout the zkSync ecosystem.
Concentrated Liquidity to Maximize LP Benefits and Activate Liquidity within the Ecosystem
The zkSwap team is dedicated to activating the dormant liquidity within DEXs by providing concentrated liquidity. An increase in liquidity utilization rate means more liquidity provided by the LPs will be utilized for the actual swaps, which in turn, provides bigger swap fees for the LPs. Taking a step further, we aim to increase the total transaction volume in the ecosystem by activating the overall liquidity in the zkSync ecosystem.
Heart of theDeFi Money Legos
Powered by light tokenomics, 100% open-source and specialized functions in inter-protocol cooperation, we aim to stand in the very heart of the zkSync DeFi Money Legos. DEX’s are a fundamental element of the DeFi ecosystem, and other DeFi protocols should be able to build on top of DEX liquidity and systems, forming Money Legos.
It is difficult to create another protocol on top of a complicatedly designed protocol. zkSwap focused on liquidity supply and swaps and does not introduce complex tokenomics. In addition, all zkSwap codes are disclosed 100% open-source, so anyone can see the core code of zkSwap. This allows anyone to freely create a new DeFi service using our protocol.
Various functions, including customizable pools specialized for inter-protocol cooperation, will become building blocks for a much more stable DeFi ecosystem going forward.
zkSwap is a protocol that grows with the community. Ultimately, we envisage a future where zkSwap is operated by the community as a DAO structure and not by the initial development team.
Bridge for a Multichain Universe
The imminent future fueled by blockchain development envisions a multichain ecosystem in which many chains with unique characteristics are bound to coexist. To ensure more active movement of assets in between the chains, we need deep enough liquidity pools, allowing for assets that have been bridged from other chains exchanged into native tokens. Concentrated liquidity provides much more sufficient liquidity to the bridged token pairs and activates the transfer of assets among chains. zkSwap aims to become a bridge between the Metis and other chains with concentrated liquidity.