Strengths and Weaknesses
- A quality team that comes up with a lot of new ideas, at the same time as taking care of good project presentation through clear overall marketing
- An expansion to layer 2 Ethereum blockchain, Arbitrum
- Lots of innovation as additions to the classic DEX in the form of lending / borrowing, liquidity provision, yield farming, staking, an NFT marketplace, and a launchpad (users can do all this in one place)
- Trader Joe's platform is simple to use
- High platform security, thoroughly audited by auditing companies. Trader Joe tries to be as transparent as possible about any dangers associated with its use
- There is a lot of competition from new and emerging blockchains in particular, which also offer cheap and fast transactions, where more and more new DEXs are being created
- The platform is relatively new, having launched in June 2021
- Using it can be challenging for DeFi beginners. Despite the platform being fairly straightforward to use, beginners will need some basic knowledge to be able to use it. We can help you get started with DeFi in our DeFi guide
- The developers are anonymous and haven’t gone through KYC
- There are always some risks associated with participating in DeFi, which you should know about before entering the industry
Trader Joe is a DEX on the Avalanche blockchain that runs on the automated market maker (AMM) system. Trader Joe was founded in 2021 by developers whose identities remain anonymous. The platform's primary goal is to simplify trading and generate interest in cryptocurrencies on the Avalanche blockchain. Trader Joe offers services such as liquidity providing, yield farming, staking, lending / borrowing, an NFT marketplace, and a launchpad in addition to the primary functions of the DEX.
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Functioning of the Protocols
Trader Joe has come up with a new feature called ‘Liquidity Book,’ which has introduced:
A whole new architecture for AMM
- It divides the liquidity for an LP into different price bins and aggregates the pools for each pair
- Composable architecture due to the fungibility of Liquidity Book (LB) tokens, which are very similar to ERC-20 tokens
- Starts with one pool for each pair, but subsequently allows the creation of multiple markets for different price bins.
New volatility accumulator
- An internal mechanism that measures market volatility
- It can react to market movements without delay or lag, providing a very accurate mechanism that measures instantaneous volatility
- It has no dependence on external data or algorithms
- They increase during periods of market volatility and decrease during calmer periods
- They help mitigate the impermanent loss (IL) suffered by LP during market turbulence
- Customizable parameters that allow the implementation of variable fees (these are customized for each individual market)
What are the functions of the Liquidity Book?
- Improving capital efficiency for LP by allowing a higher return on capital
- Reduces the impact on the price of tokens with zero or minimal slippage for traders
- Smart routing between v1 and v2 ensures that traders always get the best possible prices
Efficient liquidity management
- This feature allows users to adjust positions in one quick transaction
Users can create bespoke liquidity positions
- With Liquidity Book AMM, users have LP completely in their control, with the ability to create any type of liquidity structure
- Users can create unique strategies to suit their risk profile and target
Capital efficiency and swap fees
Trader Joe presents itself by offering swaps with zero or minimal slippage for any trade size.
Together with Liquidity Book, they have introduced concentrated liquidity (which is also used by Uniswap v3). This method of providing liquidity is more capital efficient than the original AMM DEX models. Users can choose for which prices they want to provide liquidity, instead of a range from 0 to infinity. On Trader Joe, you can provide liquidity to a pool; e.g., USDC/USDC.e, as well as being able to decide in which range this liquidity will be placed; e.g., in the range of $0.98 - $1.02.
Users typically benefit from taking advantage of concentrated liquidity because this prevents the majority of their assets in the pool from lying inactive and not contributing in any way to swapping on the platform. Concentrated liquidity ensures that traders get significantly better prices with zero or minimal slippage, even in pairs with relatively low TVL.
The Liquidity Book intelligently routes trades across new concentrated and traditional liquidity pools for even better prices. It also provides on-chain oracles with all values.
In the Liquidity Book, liquidity is split into different bins, each with a specific price assigned to the bin. The individual bins function as constant-sum pools, containing either one or both of the tokens in a pair. This is an example of a bonding curve for one of the baskets containing tokens X and Y:
The Liquidity Book combines the bins into one structure, aggregating the liquidity from all of them. The current market price of asset X can therefore be described as the price associated with the bin containing both assets X and Y (P14 in the figure below). All bins below it would consist of asset Y (P11-P13) and all above it, of asset X (P15-P17). When the liquidity from the current bin is completely depleted, meaning that it consists of only one of the assets, the price moves to the next one. Since each bin represents a fixed price point, the impact on the exchange price only occurs during bin changes.
Customizable liquidity means that you can structure and adjust the liquidity you provide to best suit your strategy.
The Liquidity Book design allows liquidity providers to easily create their own strategies to match their objectives and risk profile. Instead of a single pool with unspecified price spreads, the Liquidity Book has multiple separate bins with different prices. Those who want to earn maximum fees, and who are willing to take some risk, can place all their tokens in one bin. Others can take a more balanced approach and split it into multiple bins. Users can choose any number of specific bins and deposit any amount of liquidity into them.
Efficient liquidity management
The liquidity book concept differs from existing concentrated liquidity models in that assets deposited into Liquidity Book pools receive confirmation in the form of a fungible token. One of the key advantages of this is that users will be able to easily rebalance their LP through a single transaction, which can result in significant savings on fees.
Volatility Accumulator - A new mechanism to measure instantaneous volatility
The volatility accumulator is an innovation that arrived at the same time as the Liquidity Book. It works as a mechanism to measure the instantaneous volatility of the market, keeping track of how many price bins are affected by a particular swap and how much time has elapsed since the last swap. Each price bin change made by a swap represents a fixed increase / decrease in price, and the volatility accumulator does not rely on any external data sources. When swaps occur in a short time sequence, the accumulator will increase. When activity slows, it starts to decrease, and if no swaps occur in a certain timeframe, it resets to zero.
The Liquidity Book has introduced an innovative approach to mitigating impermanent loss in the form of variable fees. These fees are collected during each swap in the Liquidity Book and depend on a volatility accumulator that tracks market volatility. If volatility is high, the fee is increased to better compensate users for the risks and costs associated with providing liquidity. On the other hand, when volatility is low, the fee is reduced.
The Liquidity Book was developed by Trader Joe's core development team. It is a new approach to AMM that aims to remove the inefficiencies of the original x*y=k formula while maintaining the accessibility that has been the foundation of the success of previous AMM models.
If you are passionate about calculations and technology and want to dig even deeper into the workings of the Liquidity Book, read the Trader Joe whitepaper, in which everything is explained with specific calculations and formulas. The whitepaper can be found here.
The Governance token of the Trader Joe protocol is the JOE token.
In the long term, we envision Trader Joe to be a community governed protocol, such as a DAO.
Community proposals will be submitted to Trader Joe forums, where members can discuss its merits and clarify questions. Proposals may be brought up for voting by core team members, if they gain sufficient traction. More details will be announced when Trader Joe launches the forum.
The JOE token is used as a token for staking, or as a reward for farmers at Trader Joe. Governance voting is not active at this moment.
Revenue and Tokenomics
Revenue: 0.05% of all trades are paid to sJOE staking pool.
The total supply of JOE tokens is limited to 500,000,000 and there are currently 325,718,033 JOE tokens in circulation, which is 65% of the total supply.
The JOE token has been launched into the market without presale, private sale, or pre-listing allocations. The distribution of the JOE token is as follows:
50% - liquidity providers
20% - treasury
20% - team (3-month cliff)
10% - future investors (3-month cliff)
JOE is issued over a 30 month period, but the issuance is being phased down and will end in early January 2024.
CEX listing: Binance, crypto.com, gate.io, MEXC, OKX.
Cliff indicates the period of time that must elapse before token releases begin.
The Uniqueness of the Protocol
Trader Joe's functionality is not much different from that of the decentralized exchanges already on the market. However, the developers have come up with a few features that make it stand out. One of them is Rocket Joe, which serves as a launchpad for new protocols. This helps developers of new protocols get initial liquidity for their projects as well as assisting investors with buying tokens at the presale stage, at better prices.
Trader Joe is highly secure and its code is audited by several audit reports. The platform is straightforward, meaning that it is easy for beginners to learn how to use it very quickly.
Trader Joe's DEX was launched on 29 June, 2021. It aims to provide a decentralized service in the form of trading, staking, liquidity providing, yield farming, and lending. It later introduced a ZAP feature that allows users to create LP with a single click, but this feature is no longer on the platform.
My experience with Trader Joe was mainly during its greatest glory during the 2021 bull run, when its TVL rose to 2.98bn USD. During this period, Trader Joe outperformed all the existing DEXs on Avalanche and with good investment strategies, it made money. But when the crypto winter came, the decline of the entire Avalanche blockchain saw its TVL drop to the current level of 98.93m USD (Dec 2022).
As of Dec, 2022, the Liquidity book has recently been launched on mainnet and there are plans to deploy it on Arbitrum as well. The team will be working on writing up an actual road map soon.
The DEX Trader Joe created on the Avalanche blockchain will soon be deployed on Arbitrum. It will initially be deployed on the Arbitrum's test network, with a launch on the main network expected in early 2023. The goal is to gain a new user base.
Since its launch, Trader Joe has enabled more than 88 billion USD in trading volume, generating more than 265 million USD in revenue, which has been paid out 100% to liquidity providers and token holders. This success has helped contribute to the growth and development of the Avalanche ecosystem.
Trader Joe gained popularity quickly, subsequently becoming the largest DEX on the Avalanche blockchain. Trader Joe provides a one-stop shop for cryptocurrency trading and interest, as well as an NFT marketplace and as a launchpad for new projects. Developers are always trying to come up with something new that might help the whole Avalanche blockchain and increase its popularity.
Trader Joe is also planning to expand to Arbitrum shortly, which is a Layer 2 blockchain built on Ethereum. This move is likely to add to its popularity and make even more people aware of it, which will result in a positive impact on the Avalanche blockchain, as well as Arbitrum itself.
We know the main founders of Trader Joe under the pseudonymous names Cryptofish and 0xMurloc.
Cryptofish is a full-stack developer and smart contract engineer who worked on Avalanche projects like Snowball and Sherpa Cash before Trader Joe.
0xMurloc is a full-stack developer. At Trader Joe, he is mainly responsible for products and programs.
Hruday is a front-end engineer with many years of experience in crypto projects, and he has worked as a member of the DAO RaidGuild development team.
In addition to this trio, the Trader Joe team consists of a dozen other pseudonymous employees who work on software, marketing, and community.
Cryptofish worked at Google and CEX, specializing in derivatives. He holds a master's degree in computer science from an American university. 0xMurloc has founded several startups and served as a senior product manager at Grab.
Community and Marketing
The community is much less active compared with the year 2021, but there are still enough people left who believe in the project. The current environment is friendly and the team members on the Discord channel are relatively prompt in responding to queries, although it would be better if their answers were more specific to the query. The Twitter account is still active and users are still interacting with tweets, as the Trader Joe team has not slowed down and is still trying to innovate and move the project forward.
Trader Joe's has great marketing, they bring in new innovations all the time that always get quality publicity. Regular tweets with exceptional graphics add to the fact that users want to try their services.
Investors and Partners
Trader Joe's partners include Avalanche, Arbritrum One, TrustWallet, FlokiFi, DeltraPrime, Code4Rena, and many more.
Trader Joe's investors include DeFiance Capital, GBV Capital, Mechanism Capital, Three Arrows Capital, the Avalanche Foundation, Delphi Digital, Coin98 Ventures, Not3Lau Capital, and Aave founder Stani Kulechov.
Risks and Decentralization
As an application in DeFi, Trader Joe is at risk of smart contract errors and potential hacking attacks. The value of $JOE is directly linked to the success of the platform, so if the platform were to fail, the value of the token would likely decline. In addition, the liquidity pool system can also be affected by market fluctuations, which can cause a high impermanent loss for liquidity providers. It is important that users thoroughly research and understand the risks before using the platform.
Trader Joe's is still working on making the platform fully community-managed, but in any case, they promise that this will happen in the long run, thus increasing the platform's level of decentralization. Trader Joe is designed to be permissionless. To use the Trader Joe platform, users do not need KYC.
Protocol Security and Audits
Trader Joe relies upon smart contracts which were audited by professional companies to ensure that the protocol matches the highest security standards. Additionally, there is an ongoing bug bounty campaign live and running.
Audit for Trader Joe DEX
Audit for Trader Joe Lending
Audit for Rocket Joe by Trader Joe
Audit for Tokenomics v2
Bug bounty by Code4rena. Trader Joe's has organized a sponsored competition worth $50,000 for those who find bugs on the platform.
The Trader Joe platform, despite being relatively young, has shown its qualities and gained many fans because they have made it simple and accessible for users to trade and invest in crypto assets. One of the key parts of participating in DeFi is a good strategy. You can find out more about getting involved in the platform in our article, Trader Joe - Opportunities & Risks. The developers work on the project responsibly and are constantly trying to come up with innovations. There are a lot of other projects being created in DeFi at the moment, which is causing the competition for Trader Joe to increase. If they want to reach the top of the decentralized exchange market, they will have to work even harder.
Decentralized applications are still vulnerable despite the work of auditing companies, and it may be that a hacker will figure out a flaw in the code before these companies, or the developers themselves, do. In the event of a hack, users may lose their invested digital assets, which can significantly affect their motivation to continue investing money and time in DeFi. Always be prepared to accept a certain level of risk and diversify your investments wisely.