A new multi-chain liquidity protocol for emerging token projects has announced the launch of v1.0. Inspired by popular AMM-based swap systems like Uniswap and SushiSwap, and intended to address their shortcomings, LuaSwap supports smaller pools of new tokens rather than battling for liquidity within busy token pools. Users can directly swap tokens on LuaSwap across all of the current tokens it supports.
The protocol’s concept will sound familiar to DeFi users. In essence, LuaSwap enables users to stake their LUA tokens directly and earn more in return. 0.05% of the swapping fees and 0.1% of withdrawal fees for LP holders will be used to market purchase LUA, and rewards will be paid to LuaSafe stakers on a proportional basis, incentivizing them to stay with the protocol and furnishing them with governance rights. The fee percentage values are not final and will be finalized following community voting.
LuaSwap’s token supply is hard-capped at 500 million, with a base reward of 10 LUA per block divided across all existing LuaSwap pools. The project has been in beta for some time, while providing support for USDC-USDT, WBTC-USDC, LUA-ETH, LUA-SUSHI and others. Over $11M of locked value has gone into the protocol thus far.
The LuaSwap smart contract has now migrated all liquidity from Uniswap LP tokens over to the new protocol. Uniswap LP holders have acquired LuaSwap LP tokens instead, representing the same share of liquidity they had on the other DEX protocol. Unlike many comparable projects, LuaSwap is launching without seed investment, founders’ fees or pre-mining.
Liquidity Providers can now add and remove liquidity directly on LuaSwap, whereupon a withdrawal fee of 0.1% will be applied. The fee is designed to encourage long-term LPs and to maximize pool liquidity.
DeFi exchange protocols have proliferated in recent months, giving traders the opportunity to trustlessly swap between ERC-20 tokens without any order book. They have also attracted a huge amount of liquidity, with the total value locked in DeFi protocols having crossed $11B in late September. DEX volume over the last 30 days, meanwhile, exceeds $19B.
Earlier this month, Ethereum whales moved $50M worth of Ether to Uniswap in six different transactions.
The attraction of swap protocols like LuaSwap and Uniswap is easy to understand: the censorship-resistant decentralized applications help users maintain their privacy by dispensing with KYC-AML verification processes. As well as enabling projects to build liquidity, they also give everyday traders the opportunity to earn rewards by staking their tokens, and to trade without reliance on an intermediary.