What is Singularity?
Singularity Swap is a decentralized automated market maker (AMM) that uses single-side staking to eliminate impermanent loss while also providing low slippage trades for correlated and non-correlated ERC20 tokens. It does this by intelligently shifting liquidity to concentrate around the current oracle price, in real-time. For a high level overview of the protocol, check out our medium article here.
Uniswap (and most other AMM designs) utilize a x*y=k (or similar bonding curve) to determine liquidity concentration and market prices. Users have to deposit both tokens to be a liquidity provider, which exposes them to impermanent loss when the ratio deviates from the ratio they initially deposited at. This is a chronic issue for the majority of UniswapV2 style AMMs.
In contrast, Singularity implements single-sided deposits. This effectively eliminates impermanent loss. To determine pricing, the protocol utilizes rapidly updating on-chain oracle feeds (aggregated from numerous centralized exchanges) to determine and prioritize areas to concentrate liquidity. By outsourcing the “correct” price, the protocol can safely concentrate liquidity around the oracle price without having to rely on external market conditions.
Each Singularity pool keeps a record of its assets and liabilities.
Assets are the number of tokens currently in the pool.
Liabilities are the number of tokens owed to liquidity providers.
This allows the protocol to calculate the pool’s collateralization ratio (assets / liabilities) and whether the pool is overcollateralized (assets > liabilities) or undercollateralized (assets < liabilities).