I was woundering why it seemes most swaps dont use orderbooks like exchanges for trading but use liquidity pools ect? Is there a technical reason for this based on gas fees or something i would assume?
Posted Jan 7, 2022, 11:11 PM UTC
[deleted]
Ty! I will have a look tomorrow
Many less popular tokens (ie, the vast majority of tokens) do not have much liquidity. There are some orderbook DEXs, like etherdelta, which have been around for a long time, but they run into problems with liquidity for large orders of anything but the most highly traded tokens. That’s why the uniswap liquidity pool method is such an innovation because it allows token developers to bootstrap trading of their tokens.
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
[removed]
Simpler implementation, cheaper in gas costs and it encourages people to provide liquidity and earn fees.
But earning fees from liquidity seemes like a negative thing for the users of the swaps in my opinion. Like that cost ends up on the users again.
You have the same issue with orderbooks, if you want deep liquidity you have to provide an incentive