What are Genius Yield’s Smart Swaps?

Liquidity is the lifeblood of cryptocurrency markets. This decentralized asset class had to create a mechanism for matching orders at scale to solve the classic barter trade problem of differing needs. Such a system ensures that users, investors, holders, traders, and developers thrive. Genius Yield and Cardano are vital parts of this dynamic landscape.

Cardano stands out because it was built from the ground up, resolving scalability problems plaguing competing layer-1 legacy chains like Bitcoin and Ethereum. Genius Yield, an all-in-one DeFi platform, is building on Cardano, and one of its flagship products will be an order-book DEX. The DEX is built from scratch and integrates proprietary solutions, catering to the needs of the growing DeFi ecosystem. The platform will also contain an AI-powered yield optimizer (Smart Liquidity Vault) built on top of the DEX.

The Genius Yield Platform and Smart Swaps

The Genius Yield platform is a next-generation decentralized exchange, markedly different from other AMM DEXes like Uniswap v2 or PancakeSwap. Notably, the exchange leverages features such as determinism, higher scalability, and better security brought on the table by Cardano to introduce novel design patterns meshing with the chain’s EUTxO paradigm. Subsequently, the Genius Yield platform and its DEX incorporate features like Smart Swaps unavailable in AMM DEXes.

Smart Swaps are Genius Yield’s platform core primitive central in powering some of the exchange’s novel functionalities to perform in computationally efficient and elegant ways. It is simple by design, fully parallelizable, and is defined by minimum information. Accordingly, it requires only three parameters in “assets” — which is the pair to be traded, “action” — the behavior of the swap when the order is executed, and “conditions” — which are a set of conditions for the swap to be executed.

In an order-book DEX, Smart Swaps operate as “buy and sell orders” designed to automatically execute based on a programmable logic. The implementation in the Genius Yield platform allows for a flexible and composable protocol over which expressive orders can be defined and executed, opening infinite possibilities for traders.

Like a centralized exchange where traders can place orders that don’t immediately execute, the same features would be available in the Genius Yield platform through Smart Swaps. Furthermore, just like in a decentralized environment where smart contracts are key, Smart Swaps will only function once a set of trade conditions are met as set out in a deployed logic.

Smart Swaps’ Order Types

Accordingly, it will be possible for users to place an order on the Genius Yield platform and let it sit on the ledger until a given set of conditions are met, even canceling them when they aren’t met. However, Smart Swaps wouldn’t only be capped to limit orders. Instead, the flexibility and modularity in Smart Swaps give developers the leeway to roll out more sophisticated functionalities beyond what may be found in centralized exchanges.

As a result, besides the typical market orders, the Genius Yield platform's Smart Swaps enable traders to initiate the following order types:

A limit order - an order to buy or sell an asset at a specific price. In the Genius Yield platform, this order will remain active until it is matched. Afterwards, depending on the exchange’s liquidity, it can be fully or partially filled. If the latter is the case, it shall remain active until it is fully filled at the price specified by the trader. Genius Yield platform's traders will also have the flexibility of setting the expiry date of limit orders or even canceling them.
A stop order - functions similarly to a limit order but with two key differences. The most notable is that it won’t be visible in the order book. Secondly, the stop order uses price to trigger an actual order when the specified price has been traded. In all, a stop order is used to protect profits, limit losses, and even initiate new positions.
A dynamic order - the trigger is not price but a data type which can be an oracle stream, a financial indicator, or a statistical metric from an indicator, such as a Bollinger Band, Relative Strength Indicator (RSI), or MACD — used in technical analysis. When used, dynamic orders allow for the execution of even more complex trading strategies.
An algorithmic order - allows for abstraction and automation of advanced trading strategies within a Plutus smart contract. The order type combines market, limit, stop, and dynamic orders into a Meta order, chaining random orders triggered by a set of arbitrary conditions spread out across time. Combining different order types makes it possible to define and efficiently execute entire algorithmic trading strategies in a single, Smart Swap.

In all, Smart Swaps will exist in three states — open — that is, order submitted to the DEX but not processed, filled — an order whose trading conditions have been met and acted upon by Smart Order Router (SORs) bots, and closed — these are orders which have expired or canceled because triggering conditions haven’t been met.

Smart Swaps are a Key Cog for Smart Liquidity Vaults

Smart Swaps are a core feature in the Genius Yield platform behind which the exchange offers differentiated solutions to meet the growing needs of global DeFi users. By launching on Cardano, Genius Yield could implement Smart Swaps enabling limit, dynamic and algorithmic orders. These order types are key to the Smart Liquidity Vault, an AI-powered yield optimizer allowing users to earn passive rewards from yield optimization strategies.

YouTube video about Smart Swaps: https://youtu.be/rT_T3tDkl60