WOWswap

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Inspiration

Not so long ago leverage trading was an exclusive domain of highly-trained investment professionals. Crypto has changed this forever — currently, all major cryptocurrency exchanges offer margin trading accounts. On centralized stock and cryptocurrency exchanges traders borrow additional capital from brokers and exchange operators who decide on lending rates, fees and procedures for liquidating risky leveraged positions. However, on centralized trading platforms their operators have full control over leveraged trading rules, including decisions on capital lending rates, assets available for leveraged trading, and liquidation procedures.

WOWswap democratizes leveraged trading further by giving all power to the community. With WOW protocol liquidity providers can create and operate common liquidity pools, and traders can borrow these funds for their leveraged trades according to the rules collectively established by WOW token holders.

In decentralized finance (DeFi) leveraged trading also should be decentralized: community needs to be able to create and operate common liquidity pools and decide on leverage trading rules. So, WOWswap has adopted a fully transparent and democratic governance model: WOW token holders can vote onchain and change all parameters of the protocol instantly.

First, we built WOWswap on EVM-compatible blockchains (Ethereum, BSC, Avalanche, IoTeX, Polygon, and HECO) but Solana's unmatched speed and low transaction costs inspired us to bring WOWswap to Solana.

What it does

On Solana WOWswap works on top of Serum DEX. Using WOWswap’s smart-contracts individual liquidity providers create and operate common liquidity pools, and traders borrow these funds to finance their leveraged trades on Serum DEX.

If the price of the token that a trader buys goes up, the trader receives a multiplied profit. However, if the price of the token goes down the trader suffers a multiplied loss. When a trader closes a leveraged trading position, the liquidity pool receives back the borrowed funds plus the accrued interest.

If the token price goes below the liquidation threshold, then anyone can become a margin caller by triggering the liquidation of the trader's position. In this case the trader will lose all capital invested in the trade, and the margin caller gets the rest of the funds as a reward.

WOWswap allows to borrow additional capital in $SOL, $USDT, and $USDC to buy other tokens with leverage. At launch over 30 tokens are supported.

How we built it

Inspired by our EVM implementation available on BSC, Ethereum, Matic, Heco, Avalance and IoTex.

Anchor framework made by Serum was very helpful to build product without headache about core mechanics such as serialization and deserialization and account management.

Big difference in design of Solana and Ethereum networks made us to build everything from scratch, including the UI.

Challenges we ran into

On EVM-compatible blockchains we route trades via AMMs, such as Uniswap, Quickswap, etc. However, due to the lack of AMM protocols (with open source) on Solana we had to use order book -based Serum DEX. It was interesting and challenging to built leveraged DEX on top of Serum.
Serum DEX and SPL Token are using unsigned integers with just 64 bits of accuracy. It was a challenge to stay in limits and do not lose rate accuracy.

What we learned

Solana is way faster than EVM-compatible chains and sometimes it feels like we run on a local devnet and not on a decentralized network.
Solana requires to clear your mind and think in an absolutely new way compared to the world state in Ethereum.

Accomplishments that we're proud of

WOWswap has been running on EVM compatible blockchains since April 12, 2021. Since then we have succeeded in the following areas:

Ranked #1 platform by the number of supported assets (over 100 tokens across 7 chains)
Integrated into the UI of Pangolin DEX (Avalanche) and Mimo DEX (IoTex)
Fully audited by Hacken, running 6 months without incidents
TVL > $2,000,000
Integrated with Pancakeswap, Quickswap, Pangolin, Sushiswap, Mimo, Mdex, Serum

In DeFi we are proud of the following achievements:

Launched on 6 EVM compatible blockchains.
No collateral deposit is required before opening a trading position
Leveraged trading for fractionalized NFTs
All protocol’s parameters can be changed instantly via on-chain governance
First onchain referral program with referral payouts paid by a smart contract

Speaking of Solana, we are very proud to introduce major improvements over Mango Markets:

1. Planning a trade

In Mango Markets a user is required to deposit a collateral before opening a trading position. In WOWswap no collateral deposit is necessary - the purchased tokens become the collateral automatically.
In Mango Markets a user cannot specify a leverage - effective leveraged will be calculated based on the total collateral and a desired amount of purchasable tokens. In WOWswap a users can easily specify a required leverage - UI is very simple to understand and trade.

2. Opening a trading position

Margo Market's UI does not check if a trade will succeed or not. WOWswap prevents trades that can not be executed.
Margo Market's UI does not show liquidation price and borrow rate when a user opens a trade. WOWswap shows all important parameters of the trade.

3. Closing a trading position

In Mango Markets settling debt requires depositing borrowed currency. In WOWswap the debt settles automatically by selling the collateral

4. Supported assets

Mango Markets currently supports 7 digital assets for leveraged trading on Solana. At launch WOWswap supports 30+ on Solana and hundreds tokens on other chains, including fractionalized NFTs on Ethereum.

What's next for WOWswap

1. Launching onchain governance on Solana

First of all, we would like to add more features on Solana that we already implemented on EVM-compatible blockchains:

Instant onchain governance for changing all protocol's economic and financial parameters
Introduce short-selling functionality
Introduce leveraged trading for Fractionalized NFTs (already works on our Ethereum version)

2. Launching WOWswap Pro

Wowswap interface is minimalistic and is extremely easy to use. In fact, opening leveraged short or long position takes just 1-click. Yet we recognize the demand for more professional trading experience to maximize those gains, therefore, we will soon launch WOWswap PRO to include more trading data, always-on chart and possibility to open a position and follow the portfolio in one page.

3. Analytics page release

For all the data freaks, statistics page will display TVL, trading volume, total fees collected, interest rate changes as well as liquidation volume and trading volume changed per token.

4. Efficient capital utilization — launching WOWswap Yield Aggregator

At the time of writing, APY on BNB and BUSD is 26% and 46%, respectively with only 17%+ percent of the pool utilization ratio. It means that more than 3/4s of the pooled assets are sitting idle.

To increase pool utilization efficiency we will launch WOWswap yield aggregator to farm rewards from other protocols. Adding a yield farming strategy could generate extra 10% to 15% extra APY to WOWswap liquidity providers. In the future, the same technology could be applied for proxy-tokens, which are pegged 1:1 to the underlying tokens and are held by WOW’s smart-contract on your behalf.

5. Enable WOW burn and reward distribution

Every time a trade makes a profit on a leveraged position, WOWswap protocol charges a fee of net profit made by traders, which is adjusted by the governance. Currently the fee goes to WOWswap treasury, but very soon we will start to burn WOW tokens and distribute the rest of the protocol’s revenue to xWOW holders.

6. Launch Phase 2 of WOWswap governance — WOWswap Improvement Proposals

WOWswap On-chain Instant governance is live on selected blockchains, but some changes to the protocol require manual interference. Therefore, in the next phase WOWswap Improvement Proposals (WIP) portal will be launched where xWOW holders will be able to propose new tokens for listings, adding new features to the protocol, propose/vote on adding new charities for donations and more.

7. UI/UX Optimization

Even though the user interface on WOWswap is simple and is easy to use, there are a lot of moving parts under the hood that need to be improved, optimized and polished to make the experience as flawless as it can be. In the next few months we will focus on improving the UI experience, especially, for mobile users.