The first generation of AMMs was born with Uniswap v2

The next generation is now born with Atomic Swaps

Uniswap v2 was revolutionary by allowing any ERC20 token to be paired with another ERC20.

The price of the token is calculated by the constant product formula x*y = k. However the price impact when purchasing a token relies heavily on the depth of the liquidity. If the amount swapped is too large you will get rekt by slippage. Even though Uniswap V3 introduced concentrated liquidity large swaps will move the price substantially, especially in low liquidity bear markets

For example a $20M swap from USDC to ETH on Uni v3 will give 4.5% slippage.

Enter Synthetix Atomic Swaps..

Atomic swaps offer no slippage trades based on Oracle pricing instead of AMM Liquidity depth.

How can SNX allow this?

Synthetix stakers can mint synthetic assets such as sUSD sBTC and sETH that is pegged to the oracle price of the asset and is backed by the staking of SNX as collateral in the debt pool.

As long as there is enough SNX in the debt pool synths can be converted to another synth without slippage.

Synthetix volume has been skyrocketing lately

Curve stable pools for sUSD paired with 3pool , and sETH paired with ETH are used for entrance and exit for the routing, granting large fees to CRV lockers

Dex aggregators like 1INCH allows this by routing through the Synthetix pools.

A whale swapping USDC→ ETH might be routed through USDC→sUSD→sETH→ETH

Where normally the USDC→ETH trade would give large slippage Atomic Swaps allows this trade to be executed with minimal slippage, as the swap is executed at the current Oracle price, with close to infinite liquidity.

The requirement for the swap to be executed efficiently is that there is enough entry- and exit-liquidity in the curve stablepools.

The high volume of synthetix swaps have provided high base APRs on the curve pools in addition to SNX and CRV rewards.

Trading through synthetics pools isn't entirely free and there is a trading fee of 0.30% that goes directly to SNX stakers.

Synthetix fees have been increasing massively after the 12 minute delay was removed and dex aggregators implemented atomic swap routing

Currently Atomic Swaps is mainly being performed on Ethereum Mainnet but its about to get implemented on Optimism as well, the first curve pools have already been deployed.

Awesome to see the godfather of defi Andre Cronje co-authoring SIP-120 with Kain, JJ and Brett. And thanks to the Synthetix team for implementing Atomic Swaps and moving defi a giant leap forward.

Zero slippage and infinite liquidity.. is $SNX Atomic Swaps the holy grail of dexes?