PROPOSAL: Deploy a new in-app swap fully owned by Venus

Venus Governance Venus - Governance Proposals
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TL;DR

We propose Venus deploy its own in-app swap, as described in the Venus V4 proposal. However, instead of using PancakeSwap, we propose that Venus use native.org’s technology and liquidity infrastructure. By leveraging Native’s free infrastructure, Venus will truly own its own swap, deciding everything from available tokens, to pricing model, to the fees charged. Venus will get 100% of swap fee revenue and will not have to rely on anyone else. Liquidity and available tokens will be the same. This means more revenue for Venus and lower swap fees for the community. 

The Problem:

Venus already has its own swap, but it’s not truly “owned” by Venus. It’s powered by PancakeSwap, and their treasury, token holders, and LPs earn the majority of fee revenue. That means value leaks from the Venus ecosystem every time users buy or sell tokens through Venus’ in-app swap. 

During peak months, XVS swapped on various DEX’s generated hundreds of thousands of dollars in fee revenue each day - sometimes well over $500k. Today, it still generates thousands of dollars in fee revenue. Unfortunately, most of this revenue is being lost. This is the problem we want to solve. 

The Solution:

We propose that Venus use native.org to create its own project-owned DEX, powering swap between XVS and any other token on the BNB chain. All trading fees will be automatically sent to the Venus Treasury and used as per Venus Tokenomics or, for any other purposes the community choses.

Project-owned DEXs can be a significant source of revenue. STEPN, for example, generates almost $1M per month in swap fees from their project-owned DEX.

Native.org is modular DEX infrastructure that makes it easy for projects and DAOs to deploy their own custom exchanges. Using Native, a team can add swap as a feature on their website within minutes, and truly own it. 

Funding Milestones and Payments:

  • No funding is required.

What we’re asking for:

  • 1 day engineering time to integrate Native with Venus’ existing router

What we’ll deliver:

  • Tech infrastructure for Venus to create and deploy its own swap
  • Equal liquidity and variety compared to PancakeSwap
  • Equal or better pricing for users compared to PancakeSwap
  • All fee revenue to Venus DAO

Why should Venus DAO vote yes to this? 

This creates a new revenue stream for Venus and lowers fees for users at no cost to the project.

Useful Links & Media

native.org

info.native.org

5minutedex.com 

8 Likes
2

Hey what’s the catch, how is this sustainable for you?

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And who would be providing the LP for this?

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Thanks for submitting your proposal. Here are a couple of questions for you:

  1. Who is providing the sufficient liquidity for these pairs to compete with PancakeSwap’s current liquidity?
  2. Is this proposal only for XVS pairs? PancakeSwap offers a comprenhensive solution for a wide variety of trading pairs and even routing through multiple LPs. Can you offer something like that?
  3. It’s not all about fees and revenues, it’s also about security and robustness. What do you have to offer in terms of background and security in order to present a serious competition for PancakeSwap’s long proven track record?
2 Likes
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You are a relatively new player. How do we know you are trustworthy, if you don’t tell us from where the liquidity comes and don’t tell us how your business model works?

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completely agreed! Lets stay with pancakeswap

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Hi JR, thanks for your questions. Happy to dive deeper into any of these if you’d like more info.

1. Who is providing the sufficient liquidity for these pairs to compete with PancakeSwap’s current liquidity?

We work with various market makers and professional liquidity providers, including Tokka labs. Together, these sources total over 30% of daily crypto trading volume. We enable our partners (e.g. Venus) to access this liquidity directly, through RFQs. That means you don’t have to pay swap fees to exchanges.

We also integrate with AMMs and other sources of liquidity, including Pancakeswap, with more sources being added each month. Sometimes, Native’s professional liquidity sources won’t support certain long-tail assets and Native’s logic uses one of these AMM liquidity sources as a backup. This means coverage is not an issue, but, in these cases, pricing will be the same as swapping on that AMM directly.

We’ve looked at all the transactions run through Venus’ in-app swap over the past 60 days. Native would have provided a better quote 96.2% of the time.

2. Is this proposal only for XVS pairs? PancakeSwap offers a comprehensive solution for a wide variety of trading pairs and even routing through multiple LPs. Can you offer something like that?

This proposal is for XVS pairs, but we’d be happy to expand it to any pair on Pancakeswap with a binance perp listing. We can even include VAI.

3. It’s not all about fees and revenues, it’s also about security and robustness. What do you have to offer in terms of background and security in order to present a serious competition for PancakeSwap’s long proven track record?

We’ve undergone rigorous security testing and been audited by Omniscia. Also important to note that we’re not asking Venus or the Venus community to deposit anything or to provide access to their funds.

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The proposal looks very intriguing, but could you demonstrate the technical information. For example, the work model, your audits, service statistics?

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Interesting proposal but I was thinking that for this new DeFi era, the owned Venus swap should be multichain.
So my question is:
Is it possible for you to deliver a proper multichain swap ?
Thanks

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Thanks for the answers. Here are a couple more questions:

  1. In terms of security, you say that you are not asking Venus or the users to deposit funds for providing liquidity and I get it. But what if there is a problem with swaps that result in the lost of funds for Venus users?

  2. What’s the estimate of total additional revenues for Venus that you have modeled for the past 60 days both in USD and in % comparition? What’s your projection for the future so we can evaluate risk / benefit?

  3. You say that you work with big liquidity providers and you will provide better exchange opportunities for XVS. Would’t this improvement in revenues be in detriment of decentralization since we would be routing swaps exclusively towards “whales”?

2 Likes
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4. In terms of security, you say that you are not asking Venus or the users to deposit funds for providing liquidity and I get it. But what if there is a problem with swaps that result in the lost of funds for Venus users?

When users provide an allowance to trade, it can only be spent by the contract when the proper conditions are met and signed by the user. We have checks in our smart contracts similar to uniswap or pancakeswap to make sure that users and liquidity providers receive the expected amounts. If the conditions are not met, the transaction will be reverted. The good news is that this logic is not unique to Native or particularly new, and it has been thoroughly audited.

5. What’s the estimate of total additional revenues for Venus that you have modeled for the past 60 days both in USD and in % comparition? What’s your projection for the future so we can evaluate risk / benefit?

In our very conservative case, Venus will earn at least $45k per month in fee revenue while continuing to beat PCS and other AMM pricing > 95% of the time. By less conservative estimates, this number could easily be 10x higher.

The revenue is driven by Venus increasing its share of total trading volume by providing more competitive pricing. That will attract swappers from DEXs and even CEXs to use Venus’ in-app swap instead.

Right now Venus’ in-app swap captures .02% of total XVS volume and 0.001136% and 0.00001247% of total WBNB and BUSD volume.

If Venus captures 5% of total XVS trading volume and charges a fee of 10 basis points, the pricing will remain some of the most competitive across both CEX and DEX and generate ~$30k / month in revenue for the treasury.

Similarly, increase Venus’ share of WBNB and BUSD volume to a conservative 0.01% each, and it generates an additional $15k / month in fee revenue, for a total of ~$45k / month. As mentioned, these are conservative estimates for only 3 tokens. Venus could easily capture greater volume than .01% and for many more tokens than these 3. Very exciting!

6. You say that you work with big liquidity providers and you will provide better exchange opportunities for XVS. Would’t this improvement in revenues be in detriment of decentralization since we would be routing swaps exclusively towards “whales”?

Native allows users to trade directly with professional liquidity providers and/or LPs in AMMs, on-chain, in a permissionless way. We focus on providing the best price without discriminating based on the liquidity source. So far, the best pricing happens to come from professional sources. From a decentralisation perspective, we don’t consider this an issue, as swaps are still permissionless, settled on-chain, and fully self-custodial.

1 Like
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Thats’s the best part! No emissions or LP necessary from Venus or the community. Native’s tech connects you with various sources of liquidity on-chain and cuts out the middle man so you can offer the most competitive prices and earn any fees yourself.

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Whenever your swap leverages one of Native’s integrated professional sources of liquidity, that source will pay Native a very small fee for the privilege of filling the order. Their fees are effectively baked in to the quotes they provide (and those fully-baked prices are best >95% of the time).

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Hey sir, absolutely.

You can find our audit here: Security Audit - Native Whitepaper

You can find an in-depth overview of the tech here: Operations - Native Developers

Our TVL, volume, top trading pairs, and other stats are at info.native.org

And can see us in the top 10 on DeFillama: Dexs - DefiLlama

1 Like
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Thanks for your detailed answers. I understand the benefits for the users that want to swap and also for Venus. I also understand that capital efficiency will eventually rule the game, so it’s only a matter of time that we will see big players jumping into the DeFi scene to make profit by providing more efficient solutions.

Back to Q6, I see that it will be difficult for reatil users providing liquidity in AMM DEXs to compete with professional liquidity providers if, like you said, best pricing happens to come from the last. So what I see there is a potential risk of liquidity concentration, hence a risk of price manipulation for XVS, at the least.

Wouldn’t it be logical to think that if the vast majority of swaps start to flow towards Venus integrated DEX there won’t be enough incentive for other players to provide liquidity elsewhere? Do you see this scenario as something likely to happen? Is there a way to prevent or moderate this risk?

2 Likes
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You referred to Venus V4. My understanding is the introduction of pancakeswap entry point is to facilitate user. If say a person holds USDT, but found out USDC gives a much better yield, he can swap USDT to USDC and supply to Venus.

It facilitate users, improve user experiences, but does not change the nature of the protocol: borrow-lending protocol. If a user find DEX LP more attractive, he should use DEX instead of a borrow-lending protocol.

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Hi sir,

Right now, about 98% of XVS trading volume is on CEXs, where this is very little transparency and manipulation is relatively easy. All of the trading fees generated from that volume go to those CEXs, not LPs. By bringing more trading volume on-chain we 1) drive more volume into on-chain LP pools, increasing LP fee revenue, and 2) increase transparency, making it much harder for malicious parties to manipulate the price.

1 Like
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Agreed. We are not proposing any changes to the nature of the protocol. This is a proposal that Venus consider Native’s infrastructure to power the existing in-app swap. The benefits the Venus community can expect are increased treasury revenue and lower prices for in-app swap.

19

Interesting numbers. Thanks again for your answers.

1 Like
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LP are not always making money due to impermanent loss.