FAQ

Why is efficiency on DEXes important?

DEXes are a cornerstone of DeFi. DEXes solve several problems that are plaguing CEXes: custody with negligent risk management, outright fraud, and fake (wash) trading. All of these problems are not part of DEX trading - all activities are recorded in the public blockchain and thus transparent and immutable; the system is non-custodial; and DEXes are generally censorship resistant.

However, DEX trading tends to be much more expensive than trading on CEXes - both in terms of transaction costs and price impact, and therefore trading volume on CEXes dwarfs that on DEXes.

We believe that DEXes are the future of trading in crypto assets, and that DEXes could reach their potential of becoming the main trading venue for crypto assets, only when trading costs will be competitive to CEX trading costs.

We are dedicated to use our expertise in financial engineering and data science to present efficiency to DEX trading, in VirtuSwap DEX and the entire DeFi ecosystem.

What inefficiencies does VirtuSwap address and How?

VirtuSwap solutions address two main problems:

  • High trading costs - VirtuSwap implements a novel pool architecture, enabling liquidity pools to hold external tokens as reserves for a limited time. By doing so, we eliminate one source of high trading costs - indirect trades. Indirect trades occur when the two traded tokens lack sufficient direct liquidity. Therefore the trade is routed via multiple liquidity pools, which results in multiple excessive costs (each pool bears its trading fees, price impact, and gas fees).

  • Low returns to Liquidity Providers - in order to attract ample liquidity, which is required for efficient DEX trading, we strive to increase LP returns. Firstly, our novel pool architecture allows each pool on VirtuSwap to serve multiple trading pairs  — in principle, pool XY can serve any trade involving either asset X or asset Y, not necessarily swaps between X and Y —  increasing considerably the returns to liquidity provision.

Are there specific assets or pairs in which VirtuSwap is particularly successful?

VirtuSwap achieves the best results for asset pairs that do not have a significant liquidity pool. Most assets have a single sizable liquidity pool, typically with either ETH or a stable coin (USDC). Trading in any other pair (or: the 99% assets) is in most cases significantly cheaper on VirtuSwap than on competing DEXes.

More than 20% of all trading volume on Ethereum and Polygon blockchains is composed of indirect trades involving 99% of assets.

What are VirtuSwap’s AI agents and why are they important?

The first AI agent of Virtuswap is called Minerva — a proprietary AI-based system for optimizing protocol rewards, whose goal is to guide liquidity allocation across the ecosystem of VirtuSwap pools. Minerva consists of two modules:

  1. The predictive module, which takes all past trades in all pools on a given blockchain over a given period (and aggregates various legs of a given trade to estimate “desired trades”), all past liquidity provision and withdrawal events, and various other market signals — and uses AI-based models to arrive at the expected distributions of trades in all asset pairs over the next period.

  2. The optimization module, which takes the predicted trade distributions as well as estimated required returns for all pairs of assets and estimated inertia in LPs’ responses to incentives as given and uses VirtuSwap’s iterative AI-based algorithm to arrive at the distribution of protocol rewards to VirtuSwap pools that maximizes a linear combination of a) LPs’ expected returns net of expected impermanent loss, b) overall trading volume through VirtuSwap, and c) inverse of mean trading costs on VirtuSwap. This optimization relies on a proprietary heuristic method developed by VirtuSwap to deal with this particular type of constrained optimization.

We are currently working on multiple additional AI agents focused on protocol-level and pool-level liquidity optimization and wallet-level trade analysis. Check AI agents series articles here: 1, 2.

How do you know that this will work in practice?

We have done extensive simulations using real on-chain data, which provide numerical estimates of the superiority of trading on VirtuSwap relative to traditional DEXes. VirtuSwap allows to reduce the costs of trading by up to 50% and, at the same time, to increase returns to LPs by up to 400%.

On which networks will VirtuSwap be deployed?

VirtuSwap has been deployed on Polygon since July 2023. There are expansion plans to several additional EVM-compatible chains.

What are the competitive advantages of VirtuSwap?

There are several.

First, we use a unique, reserve-powered pool architecture to deliver superior results. Importantly, the advantages of using such architecture are orthogonal to the specific of a DEX (such as trading curve, e.g. Curve’s “stablecoin math”) or particulars of liquidity provision (such as Uniswap V3’s concentrated liquidity”).

Second, our sophisticated AI-based real-time optimization module (the Minerva Engine) guides the incentivization of liquidity providers to make sure liquidity is deployed where it is needed most. We are currently developing multiple additional AI agents.

Third, and most importantly, the experience, creativity, and vision of our contributors, backers, and partners, are second to none, as demonstrated by their past accomplishments.

Is there a VirtuSwap Token?

$VRSW is the VirtuSwap token. $VRSW is used for VirtuSwap governance. VirtuSwap tokenomics, supporting $VRSW, is state-of-the-art, building on and extending current methods of ensuring token utility.

$VRSW has been deployed on Ethereum and bridged to Polygon (where it carries the name $fxVRSW). $VRSW will be bridged to every chain on which VirtuSwap will be deployed in the future.

What are the basics of VirtuSwap tokenomics?

Our tokenomics is heavily influenced by Curve $veCRV tokens, used for governance. $VRSW holders are incentivized to stake their tokens and receive $veVRSW, used for voting on various proposals, mostly on protocol parameters and assets that can enter reserves of liquidity pools.

Unlike Curve, where you must lock $CRV tokens to receive $veCRV, VirtuSwap offers a simpler solution. By holding tokens, you can enjoy governance and cash flow benefits without the need to lock $VRSW. However, you have the option to lock $VRSW for additional rewards.

In addition, staking and locking $VRSW increases the return to liquidity provision by boosting LP rewards with newly minted $VRSW tokens. Moreover, the duration of staking (with or without locking) of $VRSW tokens positively impacts the $VRSW rewards to liquidity provision.

Are there plans for future versions of VirtuSwap?

Yes, we are currently in the process of developing VirtuSwap v2 and v3. The upcoming versions will incorporate the following features:

  • Multiple fee tiers; differentiated reserve allow lists;

  • Additional AMM trading functions, including concentrated liquidity;

  • Introducing multiple additional AI agents;

  • A decentralized hedging module;

  • The Initial Decentralized Offering module.

What does VirtuSwap name mean?

Virtus is the Roman god (or goddess) of virtue. VirtuSwap is all about efficiency and fair distribution of profit in the AMM world, these are real virtues of a trading system.

Also, VirtuSwap uses reserve-powered Virtual pools.

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