HumidiFi - The largest dark pool protocol on Solana, which has become the largest DEX on Solana by trading volume within six months, accounting for over 50%. It plans to launch its Token Generation Event (TGE) on December 5.
Let's talk about the "Cloudy and Foggy" light paper that HumidiFi has released and see what HumidiFi has accomplished.
People tend to categorize HumidiFi as part of the "dark pool" track, while HumidiFi refers to its DEX model as "Prop AMM" proprietary market maker.
Compared to traditional AMM k = x * y, which passively matches trades, Prop AMM is more proactive in market making, reflected in three aspects:
1) Off-chain computation
By using high-performance, ultra-low-latency servers, it monitors the prices of centralized exchanges like Binance, Coinbase, and the prices of on-chain DEXs.
It utilizes predictive models to forecast upcoming trends.
2) Custom oracles
Real-time updates of the latest prices, market conditions, and inventory are sent to the on-chain HumidiFi.
3) On-chain execution
By connecting directly with Nozomi and major validators, it reduces latency to complete trades. Of course, on-chain smart contracts are also responsible for fund management.
For an intuitive example:
1) Traditional AMM
Traditional AMM k = x * y determines prices based on the ratio changes of two tokens in a trading pair. Large purchase actions can cause the price curve to change rapidly.
For instance, buying 10,000 USDC of TRUMP may result in a slippage greater than 2%.
2) HumidiFi
First, the off-chain server monitors prices across platforms and finds that there are ample sell orders for TRUMP on Binance, with prices relatively stable in the short term.
The oracle communicates with the on-chain contract to inform it of the situation, allowing the on-chain contract to execute prices without a significant increase. As a result, traders can enjoy lower slippage.
Additionally, the light paper mentions two scenarios: "managing and rebalancing on-chain inventory" and "identifying and punishing toxic arbitrage and informed bots."
Specifically, when the ratio of two tokens in the LP pool is excessively skewed, for example, in a downtrend where the SOL-USDC trading pool has too much SOL reserved because users are selling SOL to the pool in exchange for USDC.
HumidiFi detects the inventory skew and the associated risk, thus lowering the sell quote for SOL.
Assuming the current CEX price for SOL is 138 USDT, HumidiFi could quote 137.5 USDT to attract arbitrage and rebalance the LP pool ratio.
To combat malicious arbitrage and front-running bots, it mainly relies on Nozomi's VIP channel to effectively cancel orders before they are executed.
Thus, HumidiFi can actually "transform from a single DEX into a universal liquidity layer for the Solana internet capital market," which is also mentioned in the light paper.
There isn't much to discuss about the token economic model; the total supply of $WET is 1 billion, with 90% controlled by the team and 10% unlocked at the ICO TGE. The ICO FDV is $69 million, which is quite reasonable, but the whitelist has already been snapshot, so don't get your hopes up.
Dark pools, like prediction markets, are one of the recent trends worth paying attention to, as CZ has mentioned before.
HumidiFi is currently the most noteworthy project among them and can serve as a breakthrough for learning.
That's all.
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