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Understanding Liquidity Pools with Mettalex

· 4 min read

March update

Introducing Mettalex - The World's first Peer-to-Peer Order book and Agent-based #DEX Powered by Agent technology. Providing superior market access also ensures "zero slippage" (what you see is what you get ) during trades by eliminating the Liquidity pools (LPs). Let us deep dive into this blog series to understand key concepts and unique features of how mettalex replaces conventional Liquidity pools.

What are Liquidity Pools (LPs)? 

Let's use the classic example of Alice and Bob to understand in detail what are Liquidity pools.

Suppose Alice wants to Trade/ swap some crypto asset like BTC (Bitcoin) for Bob's ETH (Ethereum). In the traditional market, they would trade directly. However, in many decentralized platforms (DeFi), you would have to create a basket (Liquidity pool) filled with BTCs and ETHs contributed by the decentralized community. This basket/liquidity pool helps Alice and Bob or anyone who trades BTCs and ETHs anytime at the market price.

Problems with current Liquidity pools

Even though the Liquidity pool looks lucrative and handy, it is not what it is; it comes with various short-comes like:

Slippage: Liquidity pools must rely on other individuals to fill in the basket / Pools with assets, which can often lead to shortages. What if the quantity of the assets in the pool relative to the trade is low, which creates an imbalance that leads to "Slippage"? Where Alice ends up getting fewer assets and at a price which is different that expected.

No Liquidity pools available: Limitations kick in when there are no LPs for assets you wish to perform. For example, if Alice wants to swap BTC for XRP, but there aren't LPs available at the moment, Alice has to swap BTC for USDT First and USDT for XRP second, which puts Alice to execute two different trades. This results in Alice paying twice the gas fees and possibly getting fewer assets than expected.

Impermanent Loss: Those who fill in with the basket often face "impermanent loss." Suppose in a basket / LPs of BTC/ETH if the value of one asset skyrockets in this price /value people would put in ETH to withdraw BTC might create an impermanent loss for the LP Providers.

Mettalex: Smart way to do trades

With Mettalex, we thought - why complicate things? If Alice and Bob want to trade/swap assets directly from peer to peer without basket / LPs, there should be no middlemen.

Mettalex peer-to-peer order book and AI agent-based DEX powered by agent technology allows Alice and Bob to trade directly/swap assets by its innovative order matching AI Agents, which execute trades/swaps on your behalf without the need for conventional liquidity pools, thus eliminating the slippage, impermanent loss—just simple and direct trading.

It enables cross-chain trading for individuals even if the traders are on different blockchain ecosystems. This allows significant expansion of the trading ecosystem, thus scaling the opportunities for the traders.

Mettalex offers to trade all digital assets like crypto, commodities and tokenized tangible world assets.

Why Mettalex is better

No Liquidity pools: Just two parties/members can trade assets without needing someone to create a liquidity pool; irrespective of pairs, trades can happen.

Empowering smaller trades: Empowering the community and allowing small traders to participate in decentralized finance without losing much on the fees and slippage.

Unprecedented expansion ecosystem for the traders:

Cross-chain cross-assets: Mettalex offers trades across different blockchain ecosystems at ease without the need to identify the routes or look out for the security of the bridges.

Improved Inclusion: supporting smaller and larger traders in the ecosystem, ensuring equal access to DeFi opportunities.

Mettalex isn't just another DeFi platform. It is a revolution in the future of decentralized trading. Mettalex offers a solution that's efficient, fair, and accessible to everyone. Whether you're Alice, Bob, or someone looking to trade without a headache. Sign up for the private beta release and get a chance to try out Mettalex.