Nomiswap is scheduled to roll out 3 new major updates in August.
1. Boosting pools — to reduce the number of circulating NMX tokens in the free market.
2. Custom farming pools — to attract liquidity from third-party projects and to increase the utility of the NMX token.
3️. New stablecoin pools based on concentrated liquidity technology — to increase trading volume and reduce the emission of NMX tokens through farming.
Here we will talk about new pools with concentrated liquidity.
Concentrated liquidity is a new, more technologically advanced type of liquidity pool that will actually increase the effective liquidity used in swaps/exchanges by up to 100 times. That is, if $9 million is currently in the usdc/usdt pool, then when this liquidity is migrated to a new pool, it will be possible to exchange stablecoins in this pool, as if there were 900 million liquidity in this pool (in the current implementation).
This can automatically increase the volume of trading on Nomiswap for this pool, at least due to arbitrage bots and liquidity aggregators. And as a result, increase trading commissions, which, among other things, are used to pay remuneration to liquidity providers. This is our first step in shifting liquidity provider rewards from NMX token farming to trading fees, which will help reduce issuance.
The first version of this update will affect pools with stablecoins only. But development is already underway for other pools.
What are the advantages of pools with concentrated liquidity?
🔹 Trading volume for these pools may increase. This may contribute to a greater influx of traders, and as a result, an increase in the volume of trading commissions, which, among other things, will be used to reward liquidity providers.
🔹 Thanks to the payment of liquidity provider rewards through commissions, it is planned to reduce the share of NMX tokens as liquidity provider rewards, which will reduce the issuance of the NMX token.
🔹 Concentrated liquidity will make it much more profitable to make exchanges and trades on such pools, and when exchanging one token for another, get more of the second token.
🔹 Liquidity in such pools on Nomiswap will be more often "noticed" by liquidity aggregators of decentralized exchanges, which can transfer significantly more exchange transactions of their users to these pools, thereby increasing trading volumes on Nomiswap.
🔹For liquidity providers, the operation of the new pools will be indistinguishable from the pools in the current implementation.
Among the popular dexes (TOP-5 in terms of TVL-volume of funds blocked on smart contracts) on the BNB blockchain, there are not yet those who have implemented such a technology. Uniswap and Curve are some of the best-known examples of this technology.
More about the mechanism of pools with concentrated liquidity:
In a classic AMM (Automated market makers) pool, the price of an asset is strictly determined by the ratio of the number of one coin in the pool to another. In the case of pools with stablecoins only, the coins are relatively equal in price to each other, therefore we can allow no price change or a significantly less significant change in the price of one coin in relation to another, with more significant changes in the balances of coins in the pool relatively each other.
That is conditionally in the liquidity pool initially there are 10 million USDT and 10 million BUSD. According to the classic algorithm for determining the price in AMM pools, the price of 1 USDT is equal to 1 BUSD. In our new pools, if a person wants to exchange 1 million USDT for BUSD, after such an exchange, the pool will have 11 million USDT and 9 million BUSD. User still exchanged one token for another at a stable price that was previously. If the user made such an exchange on the old classic pools with AMM, then he would receive not 1 million BUSD for his exchange, but less, since during the exchange in the pool the ratio of the amount of one coin to another changed significantly.
There is an impact on the price when the ratio of coins changes, but it is simply more delayed, in fact, the ratio of the number of two coins in the pool can fluctuate in a significant range without affecting the price or affecting, but much less than in the classic AMM algorithm.
You will be able to transfer liquidity from old pools to new ones without losing the holder bonus.
The Roadmap (Checklist) is available via this link.