Thread by @ZeMariaMacedo

Alpha leak: @astroport_fi is in audit and will be launching in mid November

DEXes are the core building block of any DeFi ecosystem. The launch of Astroport means @terra_money will now have a best-in-class AMM

Thread on why I think this and why it matters 👇

1/ As I see it, @astroport_fi provides two fundamental improvements to existing AMMs:

✦ Flexible pool model
✦ Token econ & governance

I'll cover each of them in turn

2/ Flexible pool model

Different AMMs use different algorithms (also referred to as "pool types") to price assets, with each one being appropriate for certain kinds of assets

For instance, Uniswap's xyk pool is appropriate for volatile assets but inefficient for stable assets

3/ On Ethereum, most AMMs have elected to specialise in a particular pool type

This means LPs must understand and select between a variety of AMMs to find the optimal one for their assets and preferences

4/ It also means traders must use "aggregators" such as @1inch which route across these AMMs to ensure optimal execution, introducing a secondary layer of fees

5/ Astroport takes a different approach

Instead of specialising in a particular algorithm, it uses a flexible architecture that allows builders to create new pool types that fit seamlessly within Astroport with minimal changes to core protocol code

6/ It then routes among these different pools to ensure optimal execution for traders, basically functioning as its own aggregator

7/ @terraswap_io currently only supports xy=k pools

In addition to these, Astroport will also initially support Stableswap Invariant pools as well as Liquidity Bootstrapping Pools (LBPs)

8/ Stableswap invariant pools allow for efficient trading between stable assets such as stablecoins or different wrapped versions of the same assets (e.g. $bLUNA / $LUNA)

These will become increasingly important as the Terra ecosystem grows and connects to other chains

9/ As a practical example, consider the following:

@Orion_money lets users swap from any stablecoin on Ethereum to $UST, bridging it to Terra and depositing into Anchor. It currently uses @CurveFinance for swaps and its users must therefore pay high Ethereum gas fees

10/ Astroport’s invariant pools will allow Orion to do the swapping on the Terra side instead, saving on fees (see diagram below)

Another example of where invariant pools can be useful is the $bLUNA - $LUNA pool, leading to far more efficient liquidity around the $LUNA price

11/ LBPs, pioneered by @BalancerLabs, are a token launch mechanism that enables price discovery while preventing the bot frontrunning that affects other launch mechanisms

They’ve become extremely popular on Ethereum and I expect the same to happen on Terra

12/ Token Econ & Governance

Astroport is a public good for the Terra ecosystem. To fulfil its role, it must be owned and governed by its users

Astroport’s $ASTRO token acts as a key coordination mechanism, combining best practices learned from other protocols

13/ Astroport will be fully governed by the Astral Assembly: Astroport’s DAO which will is responsible for all protocol decisions

Any $ASTRO holder can participate in the assembly by staking $ASTRO, receiving back $xASTRO

14/ Assemblers will be able to multiply their influence by demonstrating skin in the game, locking their $xASTRO for up to 2 years and receiving additional vxASTRO points

This provides a mechanism for high-conviction smaller holders to magnify their influence and rewards

15/ In exchange for governing the protocol, Assemblers will receive a set of key benefits:

✦ Direct the flow of $ASTRO via voting
✦ Preferential yield (boosties)
✦ A share of protocol fees

16/ Direct the flow of Astro

55% of $ASTRO supply is earmarked to be distributed to LPs over 4 years

Assemblers get to decide which pools receive $ASTRO incentives and how much each pool receives

17/ This will take the form of a bi-weekly governance game where assemblers vote for their favourite pools with the top 8 receiving incentives proportional to the votes they received

18/ This mechanism means all stakeholders (LPs, community members and even projects themselves) are incentivised to participate in governance in order to maximise the governance power they earn from their preferred pools

19/ Preferential yield

LPs who are also stakers will receive a boost to their share of ASTRO emissions. This creates a virtuous circle in which LPs are encouraged to become assemblers and vice versa

20/ Share of protocol fees

Stakers will receive a share of protocol fees

Half of these fees are used to buy back $ASTRO and stake it into $xASTRO, accruing to all assemblers. The other half is distributed to vxAstro stakers to reward those with more skin in the game

21/ Perhaps most importantly, @astroport_fi will be community-owned, with 70% of supply accruing to the community

30% will belong to the initial contributors to the Astroport JV who will be vested over 3 years

22/ Crucially Astroport has no VCs or passive investors

Instead, it has been bootstrapped by the contributors who built it, including Terraform Labs, @Delphi_Digital, @IDEOVC , @atticlab_it, @stablekwon, @Lomashuk from @LidoFinance, @madcapslaugh, and many others

23/ Our hope is that this token economic design encourages a diverse community of users, projects, and other ecosystem participants to stake and contribute to the DAO

We believe this level of community involvement will ultimately result in a better protocol

24/ In the spirit of community participation, Astroport will be launching with an innovative lockdrop + liquidity bootstrap auction architecture, distributing 7.5% of its supply to committed LPs

Read more about this here: astroport.medium.com/hello-astro-an…

25/ There are a lot of other dope features about Astroport, such as TWAP price oracles which will be used by @mars_protocol, dual LP incentives, improved UX (thx to the @ideocolab ninjas) and much more

Read the litepaper for more info: astroport.medium.com/astroport-lite…

26/ There have been a lot of questions from the community about the Astrodrop launch mechanics.

With this in mind, @yandelphi and I will be jumping on a Twitter spaces on 4/11 to do a short presentation + Q&A for the community

Join us here: twitter.com/i/spaces/1vAGR…