New Generation AMM: Trident | What are the three major updates brought by Sushi's Trident?

In previous articles on Blue Fox Notes, it was repeatedly mentioned that the next focus of DeFi is on improving asset efficiency. This trend can be seen from the iterations of various protocols such as Uniswap and Curve.

(This article is authorized for reprint from Blue Fox Notes, the original title is "Trident: The Trident of Sushi," original article here)

SushiSwap has announced the launch of its Trident plan, which is expected to be released in the coming weeks with no specific timeline. The Trident plan is essentially focusing on improving capital efficiency. Trident, in Chinese, means Trident, and it proposes three formulas to improve capital efficiency. So what are the three contents of SushiSwap's Trident?

Building Trident based on BentoBox

In simple terms, BentoBox is a treasury, a place to pool funds, and a yield aggregator protocol. Users deposit token assets into BentoBox to earn various passive incomes. Developers can also build their own DeFi protocols based on BentoBox, such as the Kashi lending protocol.

Asset pooling can help users save costs and reduce management efforts. For instance, when users deposit Sushi tokens into the BentoBox treasury, apart from paying gas fees for depositing and withdrawing, the rest is managed by the protocol, allowing users to earn staking fees or other protocol rewards. For more information about BentoBox, you can refer to a previous article by Blue Fox Notes titled "The Essence of the Sushi vs. Uni Battle."

Trident will also be built based on BentoBox, meaning that when users deposit their tokens into BentoBox, the treasury will generate more income on those assets through various strategies. For example, even when the token assets are not used for liquidity, they can still generate income through other strategies.

Since the liquidity of SushiSwap will flow into BentoBox, there will be up to $2 billion in treasury assets in the future, making SushiSwap not only a DEX but also a yield aggregator.

Diverse Liquidity Pools

Currently, Sushi adopts the most basic 50/50 ratio liquidity pool, while Trident attempts to meet users' diverse needs by building various pools, including traditional constant product models, as well as adding hybrid pools, concentrated liquidity pools, and weighted pools.

Hybrid Pools

Hybrid pools allow users to exchange similar assets (such as USDC, USDT, BUSD; wBTC, renBTC, etc.) to reduce slippage. Hybrid pools can contain up to 32 token assets of the same kind. Since these assets are similar, they can be traded in one pool, providing a better trading experience. Liquidity providers for hybrid pools receive NFT tokens instead of ERC20 LP tokens.

Concentrated Liquidity Pools

Regarding concentrated liquidity pools, designs and implementations have been seen in Uniswap and Curve before. Users can provide liquidity within custom exchange rate ranges. You can refer to the article "Curve's Iteration: From Lines to Surfaces" for more information.

Concentrated liquidity pools give liquidity providers greater flexibility, allowing them to achieve higher capital efficiency through personalized settings. In previous LP pools, the fee income received by LPs was related to the proportion of shares in the pool and the time of investment, while concentrated liquidity pools can achieve higher market-making returns based on strategies. Of course, this also comes with higher risks.

In addition, Trident will adopt a "mobile-first" strategy, prioritizing the user experience for mobile users.

Weighted Pools

Unlike traditional 50/50 ratio pools, weighted pools can support multiple assets and allow for custom proportions of assets in the pool, such as a 60/40 ratio, similar to Balancer's model. Trident will be able to support up to 8 token assets simultaneously.

For example, in a weighted pool, if a user is providing liquidity for the Sushi token pool, by providing $1000 liquidity, they would need to inject $500 worth of Sushi tokens and $500 worth of ETH tokens. In a weighted pool, a user could inject $400 worth of Sushi tokens and $600 worth of ETH tokens.

Overall, these various liquidity pools consolidate design concepts and practices from previous DEXs to meet more diverse user needs.

Tines as the Routing Engine

Tines is a new routing engine designed by SushiSwap for the frontend, serving as a multi-hop multi-route exchange router. It can query the aforementioned pool types and provide the best price solution based on factors such as gas costs, price slippage, and graph topology.

Multi-hop refers to the ability to exchange across multiple pools to achieve the best price, while multi-route means the ability to horizontally distribute trades to reduce slippage. In short, the core of the Tines routing engine is to help traders achieve the best exchange prices.

Finally, SushiSwap will continue to support an open-source approach.

More Integration and Implementation

In terms of design concepts, in addition to BentoBox having its own characteristics, whether it's weighted pools, hybrid pools, concentrated liquidity pools, or routing engines, similar concepts can be seen in previous protocols. With the implementation of Trident, we may see a more inclusive AMM that incorporates various concepts and practices, showing that the SushiSwap team excels in integration and implementation. The impact it will have on SushiSwap remains to be seen and should become apparent soon.