Complete guide to Defibox – EOS version of Uniswap
Updated: Oct 7, 2020
DeFi or decentralized finance is the latest buzzword in the blockchain space. DeFi has almost become a movement in the crypto world and it is leveraging all decentralized networks to implement traditional financial concepts in a trustless and transparent manner. Majority of DeFi movement is happening on Ethereum blockchain. Ethereum gas price has sky-rocketed due to this. DeFi activity has surged in some other blockchains also. EOS is one blockchain where DeFi eco-system is being developed at a sheer speed. I’m a fan of Uniswap, launched in 2018. The way it allows hassle-free swapping of ETH to any ERC-20 token and vice versa seems to be really awesome. Uniswap was the first successful fully decentralized protocol for automated liquidity provision on Ethereum. Defibox is just like Uniswap but on EOS blockchain.
What is Defibox?
Defibox is projected as a one-stop DeFi application platform on EOS. It is managed by Defibox Foundation. Newdex, a multi-chain DEX and most popular EOS DEX, is an investor into this project. Defibox is built on the simple concept whereby liquidity for exchange transactions is provided in the form of on-chain pools. This on-chain pools are equal in value for both EOS and a single EOS token traded. Trades are executed against these on-chain pools and an automated market-making (AMM) protocol. Defibox allows swap of EOS to any EOS token and vice versa. Defibox is an EOS DAPP which can be accessed from any EOS wallet like TokenPocket, MYKEY, MEET.ONE etc. Defibox can be accessed from Newdex EOS DEX interface also. Here is the link to their whitepaper.
How to swap on Defibox?
If you have performed swap on Uniswap or any similar DAPP, you’ll find the similar experience on Defibox. The swap prices are provided real-time and an automated market-making protocol (AMM) helps to exchange one token to another. Swap can be performed by the below mentioned easy steps:
• Step 1: Open Defibox from any EOS wallet like TokenPocket or MEET.ONE using the Web3 browser. • Step 2: Select swap pairs and quantity. Here I want to swap EOS to NDX. The screen automatically shows you conversion quantity.
• Step 3: Check slippage. There is an option of slippage protection here. I’m selecting 3% slippage protection. It is important to avoid unnecessary losses.
• Step 4: Press the swap button and sign the request.
• Step 5: Your swap is done. You need enough CPU resources in your EOS account to perform the swap.
How to provide liquidity?
Trades on Defibox faces price slippage. When the trade volume is big, the chance of slippage often becomes more. For proper functioning of the platform, sufficient liquidity is needed. Here, the users only provide liquidity. For example, a liquidity provider of EOS/USDT trade pair is anybody who supplies an equal amount of EOS and USDT to the exchange contract. The liquidity providers can withdraw their proportion of the liquidity at any time. When a trade takes place, a trader pays 0.2% fee to Defibox. This fee is distributed to all the liquidity providers as per on the percentage of their contribution to the liquidity pool share. This way, the liquidity providers earn passive income. Liquidity can be performed by the below mentioned easy steps:
• Step 1: Open Defibox from any EOS wallet like TokenPocket or MEET.ONE using the Web3 browser. • Step 2: Click on “Add Liquidity” and select the token pair. Here I’ve selected EOS/NDX.
• Step 3: Select the quantity of one token. The system automatically calculates the amount of the other token.
• Step 4: Press the confirm button and sign the request.
• Step 5: Job is done. You need enough CPU resources in your EOS account to perform the job.
Why do I make a loss after providing liquidity?
The value of the liquidity provider’s stake can go down after providing liquidity. Don’t be surprised. This may happen even when you keep on earning fees. This is called impermanent loss. Impermanent loss happens due to large price movement of any token. The impermanent loss prevails in the early stage of market-making or unilateral market. The effect of this temporary loss gets eliminated or minimized after a certain duration and market-making gains are realized. The same thing is applicable for any AMM based DEX.
Here you can see that after providing liquidity I’m having a net loss of 218 NDX after some days. This is impermanent loss
Governance token – BOX
BOX is the governance token of Defibox. BOX holders vote for the governance of the platform and take part in important decision making. Presently, BOX is not getting traded anywhere. The users can earn BOX by providing liquidity on Defibox.
Overall Defibox looks cool. You can perform a swap with ease and you can earn fees for providing liquidity. Currently it supports swap of many EOS tokens. After Ethereum, EOS eco-system seems to be ready with various DeFi projects. If you love EOS, give it a try.
Note: The images (if not cited) are created from screenshots and free vectors.