Decentralized exchange aggregator 1inch has introduced an automated market maker (AMM) called Mooniswap to exchange tokens at the best market price.
The developers of 1inch explained that Mooniswap is a “liquidity pool”. With its help, traders will be able to quickly exchange cryptoassets without using custody solutions of centralized platforms.
According to 1inch experts, the existing AMM mechanisms have their drawbacks, which lead to large slippage in large trades and short-term losses, from which traders and liquidity providers suffer. Later, the Curve and Balancer projects presented improved AMM models. The creators of Mooniswap said that their work is also aimed at improving the existing AMM mechanisms, and Mooniswap will meet the necessary requirements.
The 1inch developers plan to reduce arbitrageurs’ profit margins by introducing a five-minute delay in pricing, thereby reducing losses to liquidity providers. This delay will allow the market maker to create a highly competitive environment for arbitrageurs who will be forced to transact at less favorable prices. This will add value to liquidity providers. As a result, the arbitrageurs will get only a part of the slippage, the rest will go to the common pool of liquidity providers. According to the developers of 1inch, Mooniswap will bring the platforms more revenue – 50-200% compared to Uniswap V2 .
The main sources of liquidity integrated with 1inch are Uniswap, Balancer, Bancor and Kyber Network platforms. Bancor was one of the first platforms to apply the AMM model to trade cryptocurrencies. It was later joined by Uniswap and Balancer, which are increasingly gaining popularity in the field of decentralized finance (DeFi).