What is Donkeyswap AMM?
Last updated
Last updated
Understanding DonkeySwap
Excited to explore DonkeyFinances but not sure where to begin? This guide is here to help! Whether you're a seasoned DeFi enthusiast or a crypto-savvy user, we'll walk you through the ins and outs of DonkeyFinances, explaining how it works and how liquidity providers (LPs) can earn income. Jump in and discover how DonkeyFinances creates new opportunities for maximizing your assets!
DonkeySwap is a cutting-edge automated market maker (AMM) built on the Fuel blockchain, leveraging advanced tokenomics and DeFi mechanics. It employs the ve(3,3) tokenomics model, blending Olympus DAO's game theory with Curve Finance’s vote-escrow system to address common challenges in decentralized exchanges (DEXs) such as token dilution and short-term capital.
As a decentralized exchange, DonkeySwap enables seamless ERC-20 token swaps (e.g., DAI to USDC) with low fees and minimal slippage. Instead of relying on traditional order books to match buyers and sellers, DonkeySwap uses liquidity pools. These pools require substantial liquidity to function effectively, and in return, liquidity providers (LPs) are rewarded.
DonkeySwap is a non-custodial platform, meaning developers cannot access users’ tokens, ensuring full control over your assets. Additionally, its liquidity pools are non-upgradable, providing enhanced security and stability for user funds.
By integrating innovative tokenomics and a secure, decentralized structure, DonkeySwap sets a new standard for efficient and secure trading on the Fuel blockchain.
Liquidity Provision and Rewards
Users, known as Liquidity Providers (LPs), contribute assets to liquidity pools and earn a share of the swap fees generated from trades. They receive Donkey LP (DONLP) tokens, which act as a receipt for their contribution. These tokens can be used to earn additional yield or redeemed for the initial deposit plus any accrued fees, ensuring deep liquidity across supported blockchains and facilitating low-slippage trades.
Advanced Tokenomics with ve(3,3) System
The ve(3,3) system encourages users to lock their tokens, improving liquidity allocation, governance participation, and reducing selling pressure. This model enhances the platform's overall liquidity and governance, addressing issues such as token dilution and mercenary capital.