What is the sPMM algorithm? WOO Network launches WOOFi Swap, a DEX supported by institutional market makers

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WOOFi Swap leverages its liquidity network and institutional market-making technology to provide the best pricing and lowest slippage on the Binance Smart Chain (BSC).

WOO Network has announced the launch of the Alpha version of WOOFi Swap, a decentralized exchange (DEX) running on BSC. WOOFi Swap utilizes a novel on-chain market-making algorithm called "Synthetic Proactive Market Maker (sPMM)." This algorithm aims to provide on-chain liquidity for professional market makers to better mimic the pricing, spreads, and order book depth of centralized exchanges.

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WOOFi Swap and DeFi 2.0

Starting from DeFi 1.0, decentralized exchanges were required to pay significant fees and liquidity token rewards to liquidity providers (LPs) to incentivize and create liquidity. As part of DeFi 2.0, WOOFi Swap reduces these risks by connecting CeFi liquidity and hedging strategies, while avoiding impermanent loss for LPs. This also means lower fees - compared to the 0.3% fee of Uniswap V2 and other similar AMM DEX standards, WOOFi Swap charges only a 0.1% fee. Users can instantly compare prices with other platforms through the WOOFi Swap interface and experience the quality of trade execution more intuitively.

Another feature of the DeFi 2.0 era is the rise of multi-chain solutions. Since WOOFi Swap will operate on multiple networks, users will be able to execute the same trades across multiple networks without worrying about slippage due to liquidity fragmentation on side chains and Layer2 networks. The ultimate vision of WOOFi is that users can experience the same high-quality trade execution regardless of which main chain they use, and LPs do not have to worry about impermanent loss. For traditional DEXs that use AMM algorithms, incentivizing deep liquidity across multiple networks is too costly and unsustainable.

First Build on BSC

Due to its large assets, users, and trading volume, BSC was chosen as the initial deployment location for WOOFi Swap. Technically, BSC's speed, low cost, and scalability provide a more stable operating environment for numerous decentralized applications (DApps) and traders. In the first quarter of 2021, the initial concept of WOOFi Swap also originated from a liquidity pool launched by BSC in partnership with DODO. Since then, despite only millions of TVL locked in smart contracts, nearly $3.7 billion in trading volume has been transacted through this liquidity pool. This is a highly efficient capital utilization solution, leading WOO Network to be selected for the BSC Most Valuable Builder Program.

Synthetic Proactive Market Making

WOOFi Swap has introduced an innovation called "Synthetic Proactive Market Making (sPMM)." This algorithm simulates a CeFi order book by connecting to market data streams on specific chains. These data streams frequently push market data from the WOO Network order book directly onto the blockchain. Recent tests have shown that the sPMM algorithm achieves higher capital efficiency - the ratio of trade volume to liquidity - compared to all other indices in the BSC market, allowing WOOFi Swap to charge only a 0.1% fee for all trading pairs.

Upon its launch, Kronos Research will be the first market maker for WOOFi Swap, relying on WOO Network as a liquidity source. Kronos Research is a multi-strategy quantitative trading firm specializing in high-frequency trading (HFT), market making, arbitrage, and CTA Commodity Trading Advisors, with an average daily trading volume of about $5-10 billion on global cryptocurrency exchanges. Kronos Research's advanced hedging strategies enable it to avoid impermanent loss by maintaining market neutrality.

Since its official launch, Kronos Research has been a leading market maker for dYdX, achieving notable success in DeFi. Compared to other designated market makers, Kronos has maintained a leading position in ongoing operation and providing quality liquidity in Epochs 1 and 2.

Ran Yi, COO of WOO Network and Kronos, stated, "On-chain proactive market making may be one of the biggest trends in DeFi 2.0, increasing platform capital utilization, reducing excessive token rewards causing currency inflation while avoiding lending out liquidity. We believe such innovations will help guide new participants into the DeFi space and enrich the entire blockchain industry."

The smart contracts were deployed by the end of October, initially in Alpha stage, with WOOFi Swap starting with quantified liquidity to accommodate smaller trades. The focus will be on continuous optimization of user experience and stability, monitoring performance in the development environment before evaluating liquidity, and sourcing more order flow through aggregators. After the Alpha testing phase, as the product expands to more main chains and cryptocurrencies, WOO Network may seek to add more decentralized liquidity sources. In the long run, WOOFi Swap will seek to add additional analytics, support for more blockchains and assets, more use cases for the $WOO token, and provide opportunities for users in the WOO Network ecosystem. The ultimate goal of WOOFi Swap is to become a one-stop liquidity service platform surpassing both CeFi and all mainstream DeFi networks alongside WOO X.

The smart contracts of WOOFi Swap have been audited by the top audit firm CertiK in DeFi, with the second audit currently underway, and the results will be announced soon. As an additional security measure, WOO Network has also announced an Alpha Bug bounty program with a maximum reward of $50,000 USDT.

What is WOO Network

WOO Network is a deep liquidity network that connects traders, exchanges, institutions, and DeFi platforms worldwide, providing optimal liquidity and trade execution at near-zero cost. Its flagship product, WOO X, is a trading platform for professional traders, featuring zero fee trading and fully customizable trading interfaces with deep liquidity. WOO Network is incubated by the quantitative trading company Kronos Research, with Kronos achieving daily trading volumes of $5-10 billion.