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another week, another thread! this week, i took a look at @ambient_finance (formerly CrocSwap). i read about what Ambient offers and what sets it apart from other DEXs. a few notes (w/ help from some Ambient aliens!): 
1/ the simplest way to describe Ambient is as a decentralized exchange where users can provide concentrated & constant-product liquidity on any two blockchain assets.
let’s use an example.
let’s use an example.
2/ suppose Alice has digital tokens A and B. Alice believes the price of token A relative to token B will fluctuate within a certain range in the near future.
3/ Alice decides to provide liquidity on Ambient. unlike traditional liquidity provision, where she would need to deposit an equal value of both tokens A and B, Alice decides to use Ambient’s concentrated liquidity feature.
4/ concentrated liquidity allows Alice to specify a price range within which she expects the price of token A relative to token B will fluctuate. she then deposits both tokens A and B into the liquidity pool.
5/ the tokens are now available for others to trade. the key difference with concentrated liquidity is that Alice's tokens will only be used for trades that occur within her specified price range.
6/ this allows Alice to be more efficient with her capital when providing liquidity since her tokens are traded in a small range rather than being traded at all possible prices (0 to infinity) of token A relative to token B.
7/ now, let's assume Bob has token B and wants to buy token A. if the current price of token A relative to token B is within Alice's range, Bob can swap his token B for Alice's token A on the Ambient DEX.
8/ Alice earns fees with each swap. the fees that she earns depend on the volume of transactions and her proportion of liquidity relative to others LP within the range price traded.
9/ as more trades are made within Alice's price range, she continues to accumulate fees. Alice can claim these at any time. If she believes the price will move outside of her range, she can adjust her range or withdraw her liquidity.
10/ it’s worth noting that this position needs to be managed properly because if the price moves outside of Alice's range, she will not earn any fees on the liquidity she has provided.
11/ this is generally how concentrated liquidity DEXs work, but with @ambient_finance, there are some significant benefits that liquidity providers and traders can enjoy.
13/ Ambient also has “knockout orders” which are similar to limit orders. Alice can set knockout orders (bids) in a small range under the current price of an asset & if she gets fully filled on her knockout order then the liquidity she is providing gets pulled.
14/ For example, let’s say Alice wants to buy ETH in a small range, $1620-$1640. She can set a knockout order in this range by providing USDC liquidity on Ambient:
15/ another cool Ambient feature is “surplus collateral.” traders can deposit funds on Ambient (like a CEX) & trade without having to move funds. this reduces tx fees that traders incur per trade (since no transfer txs happen) & allows them to trade more actively.
16/ so how exactly do liquidity providers make monies on Ambient?
on all DEXs, there are some fees involved with trading. LPs earn fees from trading activity in the pool they are LPing into.
on all DEXs, there are some fees involved with trading. LPs earn fees from trading activity in the pool they are LPing into.
17/ on Uni, there are generally 2 fee tiers: 0.3% and 1%. in volatile times, liquidity may be more expensive & exist in the 1% tier. during lulls in the market, liquidity might exist in the 0.3% pool.
(fees are proportional to the size of the trade, not to the size of the pool)
(fees are proportional to the size of the trade, not to the size of the pool)
19/ i can see there being more complicated fee designs which use off-chain oracles to look at order books on CEXs like Binance & decide the fee tier. this is because DEXs are directly competing with CEXs for market share.
20/ users can also pre-sign a txn (using Ambient’s account abstraction) & then wait for certain conditions to be met via an oracle before publishing the intent. this can be useful stop market orders where the user can exit once price falls below a certain value.
21/ lastly, one of my fave things about @ambient_finance is its beautiful UI. the team has done a wonderful job of combining the best parts of both CEXs & DEXs.
22/ the swap is as simple as Uni, but the UI has more pro features that allows LPs to manage their positions more easily. the best example of this is the ability to provide liquidity in a range by marking it out on the in-built chart on Ambient:
23/ overall, @ambient_finance is a super cool new DEX with a ton of unique features. i’m excited to see how traders & LPs utilize the efficiencies and features on Ambient & would love to know your thoughts!
24/ cc @ambient_finance, @0xdoug, @0xresearch, @PurposeUnkn0wn, @miyuki__eto, @0xfbifemboy, @kindahangry, @smyyguy, @swmartin19, @0xVenturesCap, @larrythecumber, @jeff_w1098, @ETH_Allday
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