Research: Investigating dominant pools in swap routers

Hi all, Kieran from CompX here!

We’re doing a little bit of research around the dominant pools being used during swaps using our swap router. Let me lay out the thinking behind it and plan. I’m going to outline below in a pseudo-scientific way, as I think that’ll be easier to convey the plan and following actions

Hypothesis
We believe that by identifying the dominant pools being used during swap transactions via a swap router we can give a better indication to liquidity providers where they should be placing their LP to gain the most fees.

Method
We have added a small function within the front end codebase to save the route provided by the swap router to our database. Additional methods are being added to then surface this data in a meaningful, human readable way on our analytics page showing the dominant pools.

We will want to surface the data using different metrics as most used pool does not necessarily mean most fees potentially gained. We will use the following to read this data:

  1. Most dominant pool by volume
  2. Most dominant pool by potential fees produced
  3. Most dominant pool by use, not taking volume into account.

Initially we plan to run the data capture for 1 week before a full review. If at that time we feel more time is needed we’ll update you all and keep you in the loop.

Note: We use the term potential fees as liquidity pools can be difficult to quantify actual fees produced due to IL and other factors. We will be using the fee percentages provided by the Dex platforms as a guide for potential fees.

Follow Up Actions:

  1. Provide an overview of data collected to the community in published forum post/ blog post
  2. Develop a test scenario to compare standard liquidity provision in one pool (a dominant pool) versus using a rebalancing approach to providing liquidity across a range of dominant pools based on our data collected.
  3. Add dominant pool information as described above into our analytics page and continue to track ongoing.

How you can help?
First off, no we’re not looking for any funding, donations or grants of any kind. To help in this research all we ask is that you use the Swap Router during this coming week.

Any feedback, comments or further ideas to enhance the above please do let us know in the comments.

4 Likes

I really like the fact it is down to one transaction we have to confirm :slightly_smiling_face: this is really nice

Also like the fact you should a breakdown of the pools that are being use for the routing very nice :blush:.

Can you add a feature that shows my last few swaps and as for the UI a little more defied boxing/buttons for where I am clicking to select my assets and other stuff . If we can get the UI to be so cool :sunglasses: looking :eyes: so so many people will love it . The UX is all good in the back end for me using it love :heart: it . So again people with a Ledger there is only one transaction to sign :slightly_smiling_face: super fast

This is brilliant, and much needed. In EVMs DEX Aggregators are increasing in popularity, whilst supporting traditional DEX volume. This also encourages DEXs to innovate and be competitive with their yield offerings to capture that volume (and thus the fees).

I’d also love to see an orderbook DEX which routes on-chain transactions through LPs with the deepest liquidity too. Limit orders are a product which are missing from Algorand DeFi. I know others have tried and failed to implement it, but with routing, it could/should be successful.

2 Likes

Oh we have limit orders with routing - it’s currently live on https://app.alammex.com/
and will be brought over to CompX in the coming week.

Thanks for the feedback on the research plan - looking forward to going through the results!

1 Like

Wouldn’t profitability already just be accounted for in the swap fee APR?

Also, to the extent you haven’t done so, you should take a look at what Chaintrail has done in this regard under their DeFi tab.

Not sure what you mean by the first point, can you clarify?

And that’s a great shout - I’ll check it out and pester them!

Oh I get you, yeah it might be but I think it’d be interesting to actually see what pools are used most within routes.

Some initial findings - small sample size, only 80 swaps but figured I’d share the top 10 pools (ignore the ‘hash’ value - it’s just for sorting)

{
“hash”: 2089807854,
“pool”: “fUSDC / fALGO”,
“count”: 23
},
{
“hash”: 3603482141,
“pool”: “ALGO / chip”,
“count”: 19
},
{
“hash”: 1769525102,
“pool”: “USDC / ALGO”,
“count”: 15
},
{
“hash”: 3669758035,
“pool”: “goUSD / SILVER$”,
“count”: 12
},
{
“hash”: 2545762540,
“pool”: “fALGO / ALGO”,
“count”: 12
},
{
“hash”: 2562426117,
“pool”: “DEFLY / goBTC”,
“count”: 9
},
{
“hash”: 3806655660,
“pool”: “USDC / fUSDC”,
“count”: 9
},
{
“hash”: 545243054,
“pool”: “ALGO / USDC”,
“count”: 8
},
{
“hash”: 826669281,
“pool”: “goUSD / USDC”,
“count”: 7
},
{
“hash”: 1308956188,
“pool”: “fALGO / fSILVER$”,
“count”: 6
}