Multiswap problem ( high fees and slippage )

Hi, even though Shade Protocol has a better solution than most DEXs due to the own-stablecoin centric model which undoubtedly has a lot of potential even so Shade Swap is not perfect.

The current main problem is that if a regular user wants to switch from ATOM to SCRT, they probably won’t use Shade Swap because of multiswap:

  1. Multiswap causes high fees because it uses multiple pools, in the case of ATOM → SCRT it is:
    ATOM → stATOM 0.05%
    stATOM → SILK 0.3%
    SILK → stkd-SCRT 0.3%
    stkd-SCRT → SCRT 0.05%
    Total fee = 0.7%

  2. Slippage in all these pools ( in the case of LSD pools the slippage is significantly lower due to concentrated liquidity )

The combination of these two factors causes:

  1. Less incentive for users to swap on Shade Swap

  2. Less Arbitrage ( the price on the Shade Swap has to be at least 0.7% different for this pair to make it worthwhile for anyone to arbitrage against, for example, the price on CEX )

  3. Less to no trading during low volatility periods ( people prefer to trade on CEXs/cheaper DEXs )

Personally I don’t see many ways to solve this problem, probably the only way is to reduce the fees and deliver the orderbook, anyway I am clueless about this myself.

This thread is primarily open for the sake of opening discussion, as have been and will be a few others, personally I hope that research and launch of new Shade products in the future will eliminate this problem and Shade will become as effective as its competitors in Cosmos and beyond.

1 Like