8. Deposit & Earn
DeX (Decentralized Exchange) on Acala allows users to quickly swap one token to another and serves three-fold purposes for the platform:
- provide liquidity to bootstrap the ecosystem: there will be markets for bridged in assets like BTC and ETH, as well as DOT, ACA and aUSD.
- as a complimentary facility for stablecoin liquidation mechanism to improve stability and reduce risk: when a liquidation being triggered, the Honzon stablecoin protocol will sell the assets off on the DeX instead of on an auction, if slippage is acceptable.
- improve usability: users can pay fees in the transacting token e.g. aUSD rather than being restricted to the network token ACA
Acala DeX, inspired by Uniswap, uses constant-product mechanism and is implemented as runtime modules hence better integrated with other protocols. Each trading pair using aUSD as base token e.g. BTC/aUSD is represented as an exchange pool. The exchange rate is set by the first liquidity provider by the amount of each token he/she deposits, and will be adjusted over time through arbitrage.
Liquidity provider is rewarded with exchange fee and an additional reward (from stability fee profit share), as liquidity here not only serve users for token swap, but also serve the Honzon stablecoin protocol for liquidation.
Note: withdrawn amount is NOT token amount, but a share amount reflecting your contribution to a particular liquidity pool.
These are the additional profit share from stability fee revenue to recognize the contribution of DeX liquidity towards stability of aUSD.