THe is a segment of the Lightspeed newsletter. To read full editions, subscribe.
The Defi trading experience is a balancing act.
Market makers juggling costs and efficiency, while traders deal with delays, slippery and the always present reality of MEV extraction. The implementation of Onchain can be slow, liquidity is often spread over different locations and gas costs – even on Solana – still exist.
These are just a few of the problems that float – the largest derivatives platform on Solana – solved to solve with Swift Protocol. The new trade standard is designed to maximize the implementation speed, to minimize slippery and to really make it gasless for perpetuals and spot markets.
Most onchain transactions are nowadays spread over AMMs, order books and private market makers, which leads to suboptimal performance. Swift protocol consolidates these sources in a single version layer. Instead of waiting for confirmations, Swift orders outsource to market makers, who compete to fill them in milliseconds, whereby better prices and deeper liquidity are guaranteed. Not too poor.
To make Swift protocol work, it needs liquidity providers to be active participants. Traditionally, market makers on Solana order bookcitating, a process that can be inefficient. Jit Market Making improves this by only submitting fillings when necessary, which reduces unnecessary gas costs. Swift further improves this by introducing a website based on the market maker’s integration, so that they can respond directly and efficiently to orders.
Swift also removes gas costs for traders and does not impose extra costs on market makers, according to Chris Heaney, co-founder of Drift and Lead on Swift protocol. “Jit -Makers are already paying gas to submit their fillings. They do not have to pay extra gas costs compared to what they are currently paying, “he told Lightspeed. This minimizes unnecessary gas costs and ensures capital efficiency. Heaney explained that market makers appreciate this system,” because they pay less gas that yield jit fillings than placing and canceling quotes on an order book. “
The Swift model also goes to one of the biggest challenges in Onchain trade: MEV or Maximum Extraordinable Value. In simple terms, MEV occurs when transactions within a block are re -ordered, inserted or censored to create profit options for arbitration bots or validators at the expense of traders. A common way that this happens is by slipping. Traders determine a maximum slip limit to ensure that their trade is still going through when prices move, but in many systems, market makers can immediately fulfill the trade on that limit to extract extra profit.
SWIFT protocol removes this risk by using a Dutch auction system, “which means that a user cannot pay his maximum slips directly. It works similar to Uniswap X and other intent protocols, “Heaney explained. Instead of having market makers immediately fill an order at the worst possible price that a trader is willing to accept, Swift forces them to compete for the best price.
How good this all this sounds, I still had to mark the protocol for the preparation of based order prioritization or the idea that orders could be prioritized on the basis of how much of the platform of the platform a user has set. My problem was the possibility that traders and companies with a deep bag would get an unfair benefit in terms of implementation priority. I am not a fan of Plutocratic systems.
Heaney clarified that there will be no priorities -based priorities, although the team is still considering how it can best be implemented.
“Propired designs only offer a ‘first look’ to market makers used, so normal market makers can also fill users,” he said. He further explained that “in combination with the Dutch auction a user of a built market can only first fill a user if they are willing to give them a great price.”
By collapsing the implementation times, removing the gas costs for traders and structuring orders to minimize MEV, SWIFT offers a new perspective on how high-performance trade in Defi can work. If the protocol provides its promises, it could set the standard for how fast, efficient and fair decentralized trade should be.
The Swift protocol is now live for the actions of existing people, with spot markets soon.
