Shadow Exchange: A liquidity innovator on the Sonic chain

officially launched on January 1, 2025, Shadow Exchange is a decentralized exchange built on the Sonic blockchain and operates on the basis of the innovative x(3,3) model, which is a highly flexible and simple incentive model to get started.

Why Shadow Exchange? 🔶

Among the many decentralized exchanges (DEXs) on the Sonic chain, you may be asking, "Why do you need another one?"

Shadow Exchange is a user-centric native creation.

In response to market demand, we provide flexible and efficient trading solutions. Not only do we break through the limitations of traditional AMM models, but we also take full advantage of Sonic Chain's high transaction throughput (TPS) and instant-confirmed transaction (Finality) on-chain.

Key Features 🔶

Concentrated Liquidity (CL)
Voting Pool Dividends Custom Fee
x(3,3) Mechanism
Dual Emission (Emission)
Dynamic Fee ( Dynamic Fees)
Competitive Mining

for Sonic 🔶

Through sub-second block processing and instant transaction confirmation, Shadow provides the ultimate transaction experience that is perfectly matched with Sonic. Liquidity providers (LPs) can adjust positions on the fly to capture market opportunities, while traders can enjoy efficient trading with near-zero slippage.

Shadow also makes good use of Sonic's FeeM mechanism. 90% of the gas cost is returned to users, further improving the efficiency of dynamic fees and MEV arbitrage, and enhancing the overall user experience.

Centralized Liquidity 🔶

Shadow is optimized for centralized liquidity to improve capital efficiency and reward liquidity providers. Participants are free to trade and allocate funds within a specific price range, potentially offering higher returns compared to traditional liquidity pools.

By concentrating capital in the most efficient price range, Shadow not only brings better returns to LPs, but also provides traders with tighter spreads and stable prices, regardless of the size of total liquidity.

Centralized Liquidity Range

Custom Fee Dividends 🔶

In addition to centralized liquidity, Shadow also provides a liquidity pool custom fee dividend mechanism. Fee income and emissions can be adjusted based on the expected volatility and risk of each liquidity pool.

Popular high-volume token pairs, such as S/USDC, can choose to receive direct fee dividends; Emerging or highly volatile pairs, on the other hand, can attract liquidity through SHADOW emissions.

Optimised fee dividends help them become self-sufficient and continue to attract capital. The project can design the most appropriate reward structure according to its own needs.

Dual Emissions 🔶

Between Gauge and non-voting liquidity pools, Shadow offers a variety of reward options. The following is the preset fee dividend ratio:

dynamic fee 🔶

Shadow's algorithm will automatically adjust the fee according to market conditions and trading volume. According to the FeeM mechanism, the commission can be changed every 30 seconds at a minimum.

Although dynamic fees are not the first of its kind, Shadow's system monitors the trading volume changes of other DEXs and CEXs at the same time, so it can provide better performance and price stability during price fluctuations.

Competitive Mining 🔶

Competitive mining rewards the most productive and competitive liquidity. Under the centralized liquidity model, users are free to set any price range from 0 to ∞ to provide liquidity.

The more precise the range of advantages, the higher the rewards. This aligns the interests of liquidity providers with Shadow. The incentive design is designed to increase the trading volume of the pools, making them the preferred liquidity pools for aggregators. Pooled liquidity is more efficient than traditional liquidity pools (v2 pools) in directing transaction volume. As the trading volume increases, so do the fees generated by the pool, and these actual yields are returned to liquidity providers and xSHADOW stakers.

How is it different from other models?

Centralized liquidity is 80–100x more efficient than Uniswap V2 in terms of price accuracy, and the resulting fees are also increased exponentially. However, the smaller the position range, the greater the risk of impermanent loss. Users should monitor their positions frequently to minimise risks. On the Sonic chain, position management is more efficient and responsive.

And on Shadow, all users get quite a reward. The more accurate the position range, the more active the liquidity, and the more profitable!

2.82K

The content on this page is provided by third parties. Unless otherwise stated, OKX TR is not the author of the cited article(s) and does not claim any copyright in the materials. The content is provided for informational purposes only and does not represent the views of OKX TR. It is not intended to be an endorsement of any kind and should not be considered investment advice or a solicitation to buy or sell digital assets. To the extent generative AI is utilized to provide summaries or other information, such AI generated content may be inaccurate or inconsistent. Please read the linked article for more details and information. OKX TR is not responsible for content hosted on third party sites. Digital asset holdings, including stablecoins and NFTs, involve a high degree of risk and can fluctuate greatly. You should carefully consider whether trading or holding digital assets is suitable for you in light of your financial condition.