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Sushi has begun the distribution of Trident, their new automated market maker. The Sushi team revealed in a blog post that a beta version of its long-awaited AMM had been launched on Polygon. Trident, unlike SushiSwap V1, is touted as a production framework for developing and deploying AMMs.
Market makers are essentially liquidity providers. In trading, liquidity refers to how quickly and seamlessly an asset can be bought or sold. Let us understand this with an example. Suppose trader A wants to buy one bitcoin. The centralised exchange that oversees the trade provides an automated system to find a seller, trader B, who is willing to sell a bitcoin at the rate quoted by trader A. Here, the exchange is acting as a middleman.
Unlike the first version of SushiSwap, Trident is marketed as a production framework for building and deploying AMMs. Instead of managing liquidity pools, Trident allows users to create their own pools similar to rival Uniswap exchanges. In addition, users who already provide liquidity to the first version pool in Polygon can now transfer their positions to Trident.
Unlike SushiSwap V1, Trident is marketed as a production framework for building and deploying AMMs. Instead of solely managing liquidity pools, Trident lets users create their own pools similar to rival decentralized exchange Uniswap. Additionally, users who already provide liquidity to a V1 pool on Polygon can now migrate their positions to Trident. “While AMMs can be created using the Trident code, there isn’t a specific AMM at the center of Trident. Instead, there is a framework for creating any AMM anyone would ever need,” the post reads, explaining how Trident’s end goal is to consolidate various types of automated market makers into a single unified interface. Trident also aims to standardize the way liquidity pools are created using its new IPool interface, which it calls the “crux” of the Trident production framework. “Much like the ERC-20 token standard was needed for token types to become efficient, the IPool standard is needed to make pool types more efficient,” the post states.
AS the ERC-20 token standard was needed to make tokens more efficient, the IPool standard is needed to make pools more efficient.
Firstly, Trident will expand its pool options to let users create their own liquidity pools and provide concentrated liquidity, similar to the experience of using Uniswap V3. It will also replicate the weighted pools pioneered by Balancer so that users can contribute liquidity in different weighted amounts instead of forcing them to provide a 50:50 split of two assets. Finally, Trident will implement hybrid pools to improve swapping between like-kind assets such as stablecoins. Trident also aims to reduce the gas costs for using the exchange by introducing a new routing engine for swaps.
Sushi has also said that users will be allowed to build and operate all of their pools in Trident. Like all other protocols in the sushi ecosystem, part of the transaction costs incurred through Trident are sent to xSushi token holders.
Next to the Constant Product Pool that’s currently for preview on Polygon right now. The team has three additional pool types in the pipeline still (Concentrated, Stable, and Index pools). These pools are like a starter set for the DAO to prove what is possible using IPool, and they will be released in the order that the audits (and available resources) make them available. Because Trident is a framework, if the team decides to add a new pool type themselves, they can do this much more easily, without having to re-deploy a new codebase with each new pool. When new pools are whitelisted and deployed on Trident, they continue to exist within the Trident framework, which means they collect fees for xSushi holders. As well, any outside developer can use Trident to create custom AMMs by extending the IPool interface in their pool contracts, and launch them in the Trident framework. Any pool type that passes an audit and an internal review is eligible to be whitelisted and deployed on Trident.
Automated market makers are a part of decentralised exchanges (DEXs) that were introduced to remove any intermediaries in the trading of crypto assets. You can think of AMM as a computer programme that automates the process of providing liquidity. These protocols are built using smart contracts -- a computer code that executes itself -- to mathematically define the price of the crypto tokens and provide liquidity.
In the AMM protocol, you do not need another trader to make a trade. Instead, you can trade with a smart contract. So trades are peer-to-contract and not peer-to-peer. If you want to trade a particular crypto asset with another, like Ether (ethereum's native currency) for Tether (ethereum token pegged to the US dollar), you need to find an individual ETH/USDT liquidity pool. As mentioned above, what price you get for an asset you want to buy or sell is determined by a mathematical formula. In AMM, anyone can be a liquidity provider if they meet the requirements stipulated in the smart contract. So, in this example, the liquidity provider will need to deposit a pre-determined amount of Ether and Tether tokens to the ETH/USDT liquidity pool. In return for providing liquidity to the protocol, the liquidity providers can earn fees from trades in their pool.
Trident will function as a superset of AMM pool designs, allowing any type of new pool design to be added as long as it fits the interface. These can include constant product pools made up of two assets at an equal monetary value; hybrid pools where users can include up to 32 assets; concentrated liquidity pools, which allow liquidity providers to narrowly scope their liquidity provisioning; and weighted pools, which function similarly to constant product pools but allow breaking of the 1:1 value match between asset pairs.
Because Trident is a framework, if the team decides to add a new pool type themselves, they can do this much more easily, without having to re-deploy a new codebase with each new pool. When new pools are whitelisted and deployed on Trident, they continue to exist within the Trident framework, which means they collect fees for xSushi holders. As well, any outside developer can use Trident to create custom AMMs by extending the IPool interface in their pool contracts, and launch them in the Trident framework. Any pool type that passes an audit and an internal review is eligible to be whitelisted and deployed on Trident.
Written by Hess
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