The aggregator of decentralized exchanges 1inch introduced an automated market maker (AMM) called Mooniswap, for exchanging tokens at the best market price.
The developers of 1inch explained that Mooniswap is a “liquidity pool”. With its help, traders will be able to quickly exchange crypto assets without using custodial solutions of centralized platforms.
According to 1inch specialists, the existing AMM mechanisms have their drawbacks, which lead to large slippages in large transactions and short-term losses, which affect traders and liquidity providers. Later, the Curve and Balancer projects introduced improved AMM models. The creators of Mooniswap stated that their work is also aimed at improving the existing mechanisms of AMM, and Mooniswap will meet the necessary requirements.
1inch developers plan to reduce the profit margin of arbitragers by introducing a five-minute delay in determining prices, thereby reducing the loss of liquidity providers. This delay will allow the market maker to create a highly competitive environment for arbitragers, who will be forced to make transactions at less favorable prices. This will add value to the liquidity providers. As a result, the arbitragers will get only a part of the slippage, the remaining part will go to the General pool of liquidity providers. According to the developers of 1inch, Mooniswap will bring platforms more revenue — by 50-200% compared to Uniswap V2.
The main sources of liquidity integrated with 1inch platforms are Uniswap, Balancer, Bancor and Kyber Network. Bancor was one of the first platforms that started using the AMM model for making trade transactions with cryptocurrencies. Later, it was joined by Uniswap and Balancer, which are increasingly gaining popularity in the field of decentralized Finance (DeFi).