Permaswap Network Whitepaper

May 16th, 2022

Omnipresent Peer-to-peer; 100% Permanent 0% slippage.

Overview

Decentralized exchanges have created tremendous value over the past few years, with DeFi TVL exceeding $200 billion. This value is carried out with decentralized blockchain smart contracts. Since 2020, DeFi has seen an explosion of various economic models, with TVL rapidly expanding from billions to hundreds of billions of dollars. However, DeFi's performance and user experience have not improved. Also, performance, gas fee costs and user experience has become a major challenge for blockchain scaling.

Arweave and SCP (Storage Consensus Paradigm) bring a new solution to performance, gas fee cost and user experience. everPay, based on SCP, features real-time token payments that deliver 10 million transactions while unifying the transfer experience across different blockchains into an experience closer to a traditional payment method. Both users and developers can get a cheaper and more efficient on-chain experience. On top of the Arweave and everPay protocols, we created the Permaswap Network to provide DeFi users faster transactions, lower costs, and a better overall user experience.

Using AMM technology, the Permaswap Network is a fully decentralized, distributed P2P trading network that is infinitely scalable while effectively being protected against MEV attacks.

The Permaswap network will operate as a DAO and evolve in four phases, gradually moving from limited node coordination and management to multi-node community governance, as described in the "Roadmap" section.

Introduction

The Arweave ecosystem is growing rapidly, with more and more projects choosing to develop on Arweave. The number of well-known projects has expanded from single digits to double digits. With a variety of project types and different design patterns than the ETH ecosystem. The Arweave ecosystem compared to Ethereum is like Ethereum versus Bitcoin: Ethereum is a global computer that supports Turing-complete on-chain computing and can develop financial applications that Bitcoin cannot. Arweave goes a step further by providing a permanent, immutable, and traceable data source, allowing for a much more diverse set of applications than Ethereum.

Developers can use SmartWeave or SCP to create innovative WEB3 applications cost-effectively and quickly. These applications have the ability to scale massively, but for now assets are not as flexible and composable as on EVM blockchains. The main reason for this lack of composability is that the Arweave’s infrastructure is still inadequate; the most needed facility is a decentralized exchange that provides liquidity for projects.

Permaswap’s primary goal is to provide a decentralized exchange service for Arweave ecosystem tokens and activate the liquidity of those tokens. At the same time, everPay is a multi-chain Layer0 financial infrastructure. Using everPay to pay for Permaswap transactions makes Permaswap a multi-chain but more importantly a cross-chain decentralized trading network.

Advantages

Permaswap Network is a fully decentralized P2P network where LPs in the network are peer-to-peer self-hosted accounts and assets are self-managed by the user's private key. Any individual or institution can deploy a program that conforms to the network protocol to provide liquidity in the network. The nodes in the network perform price calculations and build peer-to-peer orders in a distributed manner according to protocol rules, which makes the network censorship-resistant and scalable; this can provide trading services for tens of millions of users.

Users can trade on Permaswap with extremely low gas fees without experiencing MEV issues, which fully protects their rights. At the same time, the network protocol can flexibly support multiple AMM algorithms, giving LPs more options for market making accompanied by real-time and fast trading mechanisms that allow LPs to adjust their market making strategies more flexibly to protect their market making returns.

Censorship Resistant Peer-to-peer Network

A fully distributed P2P network where anyone can deploy Router and LP nodes. Censor-resistant, it cannot be interrupted or shut down.
Infinite Scalability

Each Router can connect to hundreds of LP nodes providing exchange services to thousands of users. Numerous Routers can be deployed on the network in order to provide price distribution and order generation.
Flexible Configurations

Network protocols support multiple types of AMM market-making curves. LP nodes can select market-making curves according to their own requirements.
No MEV

Users sign orders with a deterministic bundle that identifies income as well as expenditure, the bot can’t carry out MEV attacks nor can it utilize user’s assets for arbitrage.
Asset Self-Custody

Private keys and assets are kept in the hands of the LPs, attack vectors are decentralized and assets are highly secure. No need to worry about the risk of complex smart contract code implementations. LP nodes only follow the simplest mathematical notation for quoting and signing. Simple and easy to securely audit.

Compare traditional on-chain AMM and Permaswap with the following chart:

Architecture

Permaswap Network consists of two types of nodes, Router and LP. The Router is responsible for price aggregation and order generation, while the LP provides asset liquidity to the network.

Router Node

By staking PSN tokens, any individual and institution can be a Router node.

The Router node is the network hub of the Permaswap Network and is the generator of trade orders. The Router node collects all LP quotes (token information, liquidity, quote range, and other parameters) connected to this node, when a user makes a trade request to the Router, the Router generates a quote based on the collected LP information and returns it to the user as an everPay bundle transaction. After confirming the quote, the user signs the bundle transaction using his wallet. At the same time, the bundle transaction is notified by the Router to the corresponding LP for signing. When all parties involved in the transaction have signed, the order is then sent from the Router to everPay for real-time execution.

What is a bundle transaction？On everPay, a bundle transaction is a type of opAction. It allows a many-to-many transfer that requires the signatures of all transfer parties. If any of the subtransactions in a bundle transaction fails, the entire bundle transaction will be rolled back.

Router Node functions：

Generate the best priced many-to-many aggregated orders
Distribution of signed transactions
Submit an order to everPay for fulfillment

Within Permaswap, LP information can be shared among multiple Routers, the mobility of a single LP circulates throughout the network.

LP Node

By staking PSN tokens, individuals and institutions can become LP nodes.

The LP node is an automated quoting program that injects keys and uses a specific AMM model. The operator of the LP node needs to set up quoting curves and intervals for the LP and inject matching funds into the LP. All this information needs to be registered with Router.

When the LP is registered on Router, the LP has to sign the orders distributed by Router according to the protocol rules of the registered information. Failure to sign correctly will result in forfeiture of a portion of the staked tokens. When the PSN staked volume falls below a certain threshold, LPs would be retired by the Permaswap Network.

LPs can stop market making at any time, but must submit a cancellation request to Router. The cancellation eliminates the need to be quoted in accordance with the agreed information and allows the cancellation of the PSN staking.

AMM Model

Current AMM models for mainstream DEX’s include the constant product (x*y=k) model by Uniswap, the hybrid CSMM and CPMM model for stablecoin exchanges represented by Curve, and the active market making (PMM) model represented by DODO. In addition to DEXs based on specific AMM models, there are also aggregated exchanges represented by 1inch and Matcha, which aggregate the liquidity of individual DEXs to provide users with optimal prices.

With Permaswap Network, Router nodes are free to choose a specific AMM model, and LP nodes choose to join the corresponding Router node based on their own risk preferences and capital volume as well as make markets with the Router node's AMM model. In the future, the Router node can also choose the transaction aggregation algorithm, the AMM model will freely be chosen by the connected LPs. Eventually, the Router will be able to aggregate LP quotes connected to this node and other Router nodes in the network to provide users with the best prices.

The Router node currently uses a constant product AMM model for market making in a specific price range. LP nodes can select multiple price ranges for market making and can submit both liquidity as well as price movement directions for the corresponding price range as parameters to the Router. In response to a user's trade request, the Router uses the following formula for a specific interval based on all connected LP nodes.

（L is the total liquidity in the price interval, P is the square root of price change)

The calculated offer will generate swap paths for a user and multiple LPs, this will be converted into everPay bundled transaction orders to be distributed to the user. Once the user signs the order, the Router immediately notifies the LP to sign it. The Router aggregates a multi-party signed order and sends it to everPay for real-time execution to complete the transaction.

Since the Router is not bound to a specific AMM model, the Permaswap Network will be an automated trading network with multiple AMM models.

Limit Orders

In addition to automatic market making (AMM), Permaswap’s Network can also provide limit orders.

Arbitrage Bot: The user pre-signs a bundle order with the Arbitrage Bot as counterparty at the target price; when the price quoted in an AMM Router reaches the target price, the Arbitrage Robot can fill the user's pre-signed order and simultaneously place a reverse trade in the AMM Router.
LP one-way market making: In the current Constant Product AMM Model Router, LP nodes can implement limit orders by setting the price movement range making it so the price can only move in a certain direction.

MEV Resistence

MEV exists because of the uncertainty of block packing and the delay in transaction sequencing. In order to improve the efficiency of correct order executions, in the case of block packing uncertainty, DEXs such as Uniswap provide the ability to set slippage during the exchange process. Transactions with slippage are listened to by MEV Bots after entering the mining pool, causing users to lose the slippage spread.

The everPay bundle transaction used by Permaswap is a deterministic, atomic transaction. A user signing a bundle transaction where he spends 1 A token and receives 10 B tokens is completely deterministic, there is no chance of spending 1 A token and receiving only 9 B tokens. Any transaction that does not meet the exchange rules will result in a complete rollback of the entire bundle. At the same time, everPay provides a real-time execution environment for bundle transactions, allowing orders to be executed and confirmed in real time, so there is no need to set slippage to guarantee order execution efficiency, truly enabling WYSIWYG token exchange.

Economic Model

Permaswap will issue PSN tokens to guarantee network stability and a decentralized governance.

Token Info

Name: PermaswapNetwork (PSN)

Standard: Native, ERC20, PSC

Max Supply: 1,000,000,000

Token Function

Network access, incentives and forfeitures

With the Permaswap Network, being an LP node earns you market making revenue and a PSN token reward for liquidity mining. However, we cannot guarantee that every LP node is a trustworthy node without potential forfeiture of tokens as a punishment mechanism, and that LP nodes will always offer and sign correctly according to the protocol. For example, if a malicious LP node offers a very good price to Router but refuses to sign, this behavior will lead to a decrease in network availability. To guarantee network availability and provide stable and reliable trading orders, LPs need to stake PSN tokens when they first join the network. The staked PSN tokens from the LP nodes that refuse to provide signatures in bad faith will be forfeited, and when the number of PSNs falls below a threshold, the node will be forcibly removed by the network.

Router nodes can extract transaction fees within the network, there should be a reasonable fee guideline in the network, and Routers need to follow the protocol guideline for order aggregations and fee extractions. At the same time, Routers need to share LP information with each other to allow users to get the best offer in the network. When a Router fails to interact according to the network protocol and maliciously provides incorrect LP information to another Router, it can lead to reduced availability of the network. That being said, Routers need to stake PSN tokens, when Routers violate the protocol, the staked PSN tokens will be forfeited. when the amount of pledged PSN’s from Routers fall below the threshold, the node will be forcibly removed by the network.

Voting governance

PSN will be used for a variety of governance functions, such as network protocol adjustments, feature upgrades, voting backed by the token, etc.

Earnings buyback

Router nodes can add additional fees when aggregating transactions in the network. A portion of that fee will be used for a token buyback. Those buyback tokens will go into the ecosystem fund. Router nodes will not set specific fees in the early stages of the network.

Other functions

Permaswap Network is a high-performance exchange network serving WEB3 and the PSN token will also be used in more community scenarios such as forums, Discord, etc. in the WEB3 ecosystem.

Token Distribution

50% for incentivizing liquidity; 20% for ecosystem; 15% investors/advisors; 15% R&D.

50% liquidity mining

To secure the launch of the Permaswap Network and create sufficient liquidity, 50% of the tokens will be distributed to the community through a mining mechanism. Liquidity mining is divided into two phases: cold start and community governance. During the cold start phase the mining pool rewards will be determined and provided by the core developer team. Once the tokens have a certain level of liquidity, the mining pool rewards will be determined by community voting.

Roadmap

Network Milestones

Permaswap Network will be upgraded and transformed in four phases. The network’s early stages will face problems from technology iteration, token distribution, and little community understanding of how the technology works. The network will need to be guided and upgraded in stages. As the technology improves, the tokens will be reasonably distributed, and as the community matures, Permaswap Network will move to full DAO governance. The Permaswap Network nodes will be used and available everywhere and anywhere by then.

Precursor

Precursor Network is a prior version of Permaswap Network that enables a fully de-trusted transaction network. On this network, nodes do not need to trust any party to perform peer-to-peer atomic exchanges.

There’s only one Router node and a limited number of LP nodes. They’re composed of everPay designated NFT (Ticker) holders. LP nodes can be mined for liquidity and rewarded with tokens. However, the tokens are not transferable on the Precursor network.

Forerunner (Mainnet Launch)

Forerunner Network will complete permissionless node entry. Any individual or institution holding PSN tokens can join the Forerunner Network by staking PSNs and becoming an LP node in order to provide liquidity to the network.

The Forerunner network will conduct PSN airdrops to start PSN liquidity mining, PSN will then officially be in circulation.

Prophet

The Prophecy Network will start the decentralization of the network, with a limited number of Router nodes acting as the network hub. Individuals or institutions with NFTs will be able to enter the network as Router nodes.

Router nodes will share LP information with each other and perform distributed computation of the best price on the network. The distributed Router nodes will be able to provide a powerful trading performance and serve millions of users.

Flood

The fully decentralized Permaswap Network has permissionless Router nodes entry. Any individual or organization can become a Router node in the network by staking PSN. Each node will be able to serve thousands of users, perform massive price aggregation calculations and order generation. Countless Router nodes will be able to provide unlimited aggregation calculations.

Permaswap Network will then become a decentralized trading network governed entirely by DAO.