Oracle based Dynamic Weighted Pools

Introduction

An Oracle pool, as the name suggests, utilizes an Oracle pricing model for each asset within the pool. At Elys, we've taken this concept further with the implementation of dynamic fee mechanisms and unique incentives, creating a novel approach known as Oracle based Dynamic Weighted Pools.

Dynamic Fee Mechanism

Elys Weighted Pools incorporate a dynamic fee mechanism that continuously rebalances the pool back to its target weights.

This mechanism ensures that asset weights remain close to their target values, facilitating efficient trading and liquidity provision.

Fee Calculation Formula

The dynamic weight fees are determined by the following formula:

Dynamic weight fees = 0.05% * (W1 / W2) ^ 2.5

Where W1 is the weight of the asset being traded into, and W2 is the weight of the asset being traded out of.

Example

For example, let's assume that token A is ATOM and token B is USDC.

If the balance between A and B follows this trend in percentage represented in the pool: 50:50, 55:45, 60:40, 65:35, 70:30, 75:25, 80:20, 85:15, 90:10, 95:05

To swap ATOM (Token A) to USDC (Token B) for each scenario :

To swap USDC (Token B) to ATOM (Token A) for each scenario :

Table summarizing all the scenario :

Token A / Token B WeightSwap Token A to Token BSwap Token B to Token A

50% / 50%

0.05%

0.05000%

55% / 45%

0.08%

0.03028%

60% / 40%

0.14%

0.01814%

65% / 35%

0.24%

0.01064%

70% / 30%

0.42%

0.00601%

75% / 25%

0.78%

0.00321%

80% / 20%

1.60%

0.00156%

85% / 15%

3.82%

0.00065%

90% / 10%

12.15%

0.00021%

95% / 5%

78.68%

0.00003%

When a swap or liquidity provider improves the weight and brings it closer to the target, both the swap fee and weight-breaking fee are reduced to 0, along with an added incentive bonus.

Unique Features

Variable Swap Prices

Unlike traditional Automated Market Makers (AMMs), the swap price on Elys Weighted Pools varies based on the pool's needs.

For example, in an ATOM/USDC pool, if rebalancing requires a higher percentage of ATOM, the fees for converting ATOM to USDC will be low, and vice versa.

Weight Recovery Reward

When a swap or liquidity provider improves the weight and brings it closer to the target, both the swap fee and weight-breaking fee are reduced to 0. Additionally, an incentive bonus, known as the "Weight Recovery Reward" is provided from a "Bonus vault" specifically designed to reward users participating in the weight balance.

Bonus Vault

Our bonus Vault collects 10% of all swap fees and redistributes them to incentivized weight recovery.

Benefits of Weighted Pools

Elys Weighted Pools offer several advantages:

  • Accurate asset prices

  • Arbitrage opportunities for traders thanks to low swap fees and our Weight recovery Reward system

  • Very low swap fees with negligible price impact

  • One-sided pools won't be a concern for us because the price to be paid for swaps when liquidity is low on one side is too high.

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