A Pareto-optimal DEX utilizing multiple unique pool concepts, with optimal trade pool distribution, and optional impermanent loss insurance. (Formerly MIRQUR).
LEAN is used as a mathematical proof assistant to verify the equations on which MetaDEX is based. These proofs and the code behind MetaDEX will be made public prior to launch.
MetaDEX describes themselves as being a "pareto-optimal" DEX. But what does this mean?
When a situation is pareto-optimal it means that no change in the situation will make the system more beneficial for one user of the system without making another member worse off.
As such, a pareto-optimized system is designed at an equilibrium where the needs and desires of all actors are fulfilled in the fairest manner possible. MetaDEX's pool options, combined with their "optimal trade distribution", help to construct this pareto-optimal nature, equally satisfying the wants and needs of both liquidity providers and traders.
The novel pool concepts underpinning MetaDEX are described below.
Portfolio pools allow a liquidity provider, LP, to create a pool with any number of different tokens and set the ratio of those tokens how they see fit.
Range pools allow LPs to limit the price range in which the pool is used to facilitate trades.
This allows LPs to set limits on their impermanent loss and increase their capital efficiency. When the price moves out of the designated range the LPs collect no fees because there is no trading in and out of that pool. This is similar to functionality introduced in Uniswap V3, the concentrate liquidity, CLMM, form of the automated market maker, AMM, style of DEX.
In diode pools trades are only allowed in one direction i.e. swapping token a for token b, but not token b for token a.
This allows an LP to leisurely accumulate one asset, while disposing of another. Collecting fees along the way.
Optimal Trade Distribution
The result of the highly customizable pools describe above is the fragmentation of the available liquidity into a wide range of pools.
To mitigate this a mathematical method has been developed to manage the optimal distribution of trades over all the available pools for the tokens being traded. This optimizer is said to also optimize between DEXs, allowing MetaDEX to act like a DEX aggregator.
Impermanent Loss Insurance
There will be a dedicated and isolated fund to provide impermanent loss insurance to those that opt for it. In order to opt in to impermanent loss insurance an LP chooses a percentage of their fees to contribute to the fund. There will be separate insurance pools for each token and an LP’s maximum insurance value is limited in proportion to their contributions to the fund. This fund will initially be funded from the proceeds of the METAX stake pool; operated by the DEX’s founder.
MetaDEX will release a governance token that holders can stake to vote on proposals to improve or change the operational parameters and functionality of the platform. Proposal submission requires holding a low amount of governance tokens, and the amount of submissions is limited to prevent proposal spamming.
If a proposal is rejected then the tokens used to propose it are subject to a cool down period where they can not be used to submit another proposal. Each token’s voting power will be weighted, its voting power decreasing for longer holding times and increasing when the holder commits to voting before proposals have been released.
MetaDEX was formally known as Mirqur, and was rebranded as MetaDEX in December of 2021.