BSV thought leader and developer Joshua Henslee released a new video on April 4 describing the new AMM exchange by RelayX. You can watch the video using the link or read the summary below.
What is the RelayX Automated Market Maker (AMM)?
RelayX has released an automated market maker on BSV. This allows for instant swapping of fungible tokens on the RUN protocol.
Whereas direct swaps are ideal for non-fungible tokens (NFTs), AMMs can be better for swapping BSV for other fungible tokens because of their liquidity pools.
Like other such pools, the idea is to entice users to provide liquidity for a share of the fees, often called yield farming. Other examples of this are TokenSwap on BSV and Uniswap on the Ethereum blockchain.
Comparing RelayX AMM with TokenSwap
As of Henslee’s video recording, there’s very little liquidity in the RelayX pools. There’s also only one pair which is BSV/SHUA.
However, Henslee says that RelayX’s decision to build on the RUN protocol and the low fees associated with it will give it a long-term advantage. He also believes that the two will serve different markets; TokenSwap will predominantly serve the Eastern markets while RelayX will primarily serve Western markets.
Right now, Henslee finds the TokenSwap fees unacceptably high. While they’re much lower than the fees on other blockchains, he believes that even the $0.60 fees he’s currently paying are unacceptable. While this isn’t a huge issue now, Henslee thinks it will be in the future.
How will RelayX incentivize liquidity providers?
The way AMMs work is to incentivize users to provide liquidity for a share of the fees. Right now, there’s only $20,000 of liquidity on the RelayX AMM. Likewise, there’s always the risk of impermanent loss because of the volatility, which in turn is exacerbated by the low liquidity levels.
Henslee looks at how TokenSwap attracted liquidity to its pools for potential solutions. It added a Tron-Tether bridge which allows people to tokenize Tether and bridge it onto the BSV blockchain. This spiked their liquidity by over a million in a day. RelayX has already done this to a degree with USDC. While there are still doubts about USDC, Henslee feels it’s less risky than Tether.
Henslee acknowledges that a stablecoin on BSV is a controversial subject, but he believes it would be a good way to attract liquidity. He notes how the fees for using USDC on chains like Ethereum are “out of control, and only going to get worse.” However, he doesn’t know how RelayX can use USDC without settling on Ethereum and paying the associated fees.
Another way for RelayX to attract liquidity would be to offer a swap for SAITO. While this is tokenized on Ethereum, BSV users were able to speculate on it on the RUN protocol. Henslee believes that if RelayX offers a Saito swap, it will attract users from other blockchains who want to swap with lower fees. He acknowledges that economic incentives will win out and that most users don’t care what blockchain they use. They’ll gladly use BSV when they see the cost savings. This will then lead to a virtuous cycle of increased liquidity, leading to new pairs, which will lead to more increased liquidity, etc.
Henslee is excited about the new RelayX AMM
Overall, Henslee is excited about this development. He believes it’s going to attract more liquidity and users to BSV. The lack of liquidity is one of the biggest problems, and this could be the thing to fix it.
In addition to new users, Henslee notes that RelayX has many existing users compared to TokenSwap. While the latter has many more pairs right now, Henslee believes that gap will be closing sooner rather than later. These existing users will likely want to use the RelayX AMM, giving it another advantage over its competitors.
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