EulerSwap vs. Traditional AMMs: A Brief Comparison

EulerSwap’s design contrasts with conventional AMMs in a few notable ways (targeted to a crypto-native audience):

• Liquidity Location:

  • Traditional AMMs: LP funds sit in a dedicated pool contract, idle except for swaps.
  • EulerSwap: Liquidity stays in the LP’s Euler vault (user account) and is not locked away. This means funds can earn lending interest and even be utilized elsewhere simultaneously, improving capital use.

• Revenues:

  • Traditional AMMs: LPs earn only swap fees (plus any external incentives).
  • EulerSwap: LPs earn swap fees + lending interest + protocol rewards on their assets at the same time. This multi-source yield can substantially increase LP returns.

• AMM Curve:

  • Uniswap v2: fixed invariant (x*y=k, 50/50 liquidity).
  • Uniswap v3: concentrated ranges set by LPs (active management but manual).
  • Stableswap: concentration is adjustable via amplification factor.
  • EulerSwap: fully parameterizable curves at pool creation which means that users can replicate a constant-product, stable-swap, or custom shape by tuning the concentration parameter. Users also set the equilibrium price explicitly, which avoids initial mispricing. Once set, the curve is fixed for that pool, but users have flexibility to choose it and redeploy if needed.

• Price Impact & Depth:

  • EulerSwap’s dynamic borrowing allows it to reduce price impact for a given amount of liquidity far more than traditional AMMs. In EulerSwap, depth can be boosted by lending market liquidity – effectively tapping the wider ecosystem liquidity. With an EulerSwap pool that has $100k in a vault could facilitate a$1m swap, by borrowing against that $100k to facilitate the trade. The trade-off is potential temporary borrowing and slightly higher gas (see below).

• Integration & Composability:

  • EulerSwap is built for maximum integration. Its compatibility with Uniswap v4 hooks means that as aggregators and the next-gen Uniswap roll out, EulerSwap pools can be discovered and used by traders seamlessly. In effect, EulerSwap could become a specialist liquidity source within larger networks (for instance, providing deep stablecoin liquidity that aggregators tap into). EulerSwap is positioned to slot into the routers of dex aggregators by design. Furthermore, EulerSwap benefits from Euler’s composability: Users can bundle lending and swap actions together in one transaction using batch transactions.
  • For ideas and inspirations we recommend checking our finalists to Encode Hackathon here.

Simply put, EulerSwap maintains the core function of an AMM but builds upon it with Euler’s lending capabilities to create a more capital-efficient, flexible, and integratable DEX.