Duality Labs gives liquidity providers superpowers. With a novel mechanism design and incentive system, Duality is challenging the status quo of complicated, unsustainable DEXes. Fusing the best of AMMs and orderbooks, Duality will unleash the full power of liquidity provisioning by bringing a simple, sustainable DEX to Cosmos.
In 1192, Doge of Venice Enrico Dandolo issued the Ducat and Florin, the first tokens since the fall of the Roman Empire. It didn’t take long for the merchants of Venice to offer services to exchange these tokens for each other. Venice’s exchanges became increasingly robust, and now act as the model for the global financial system.
And, for centuries, from Venetian merchants to Fidelity Brokerage, the fundamental business model of exchanges did not change — fee for service.
Today, we are at the very beginning of a global financial revolution. Every assumption is being challenged, and fundamental primitives are being rebuilt from the ground up.
The first wave of the revolution in trading and exchanges was set off in 2014, when Robinhood launched no-fee trading. This unleashed a wave of retail trading volume. Suddenly, millions of people could buy and sell assets, of any amount, without paying fees.
However, no-fee trading also raised eyebrows. Traders realized that if they’re not paying for the product, they are the product. Over the past decade, retail and crypto traders have become familiar with Payment for Order Flow and inflationary incentive schemes, which offer a small glimpse into the market structures which hurt traders and liquidity providers alike.
Today, we are excited to usher in the next wave of that revolution, and it’s an ambitious one. Eliminating the misaligned incentives and opaqueness of traditional finance while maintaining its capital efficiency and familiar UX requires starting from first principles. As it turns out, blockchains happen to be a great mechanism for exactly that.
At Duality Labs, our mission is to build simple and sustainable financial markets to unleash the full power of liquidity provisioning. To do so, we not only rethought the incentive structures surrounding traditional and crypto exchanges but are actually introducing a novel mechanism design to deliver a more simple and capital efficient exchange.
In A World Full of Complicated, Unsustainable DEXes…
Thus far, two types of exchanges have reigned supreme in financial trading: automated market makers (AMMs) and orderbooks.
AMMs are complicated. AMMs often rely on unintuitive LP UX, PhD-level math, and complex protocol designs which make them hard to build with and reason about.
Many AMMs are also bootstrapped with inflationary token policies, which create unsustainable economics and harbor misleading claims. (Warning: people don’t actually make money on 90% APY pools after impermanent loss!)
Orderbooks have increased in popularity recently due to their familiarity and capital efficiency. However, they are not made for a crypto-native world, where liquidity positions can be tokenized and computation is inherently inefficient. On-chain orderbooks abandon the composability and computational efficiency that AMMs guarantee.
Currently, traders and liquidity providers need to choose between transacting on orderbooks or AMMs.
What if you didn’t have to choose?
Duality Gives Liquidity Providers Superpowers
Duality supercharges every liquidity provider and trader that uses its DEX.
Our novel mechanism design is intentionally simple: it’s an assortment of constant-priced pools. Rather than choosing to add liquidity to a single predetermined pool, LPs add range orders at specific prices. This simplicity unleashes the full power of liquidity provisioning, unshackling LPs from the complicated, unsustainable models that dominate DeFi.
As a Cosmos app-chain, Duality is pushing the bleeding edge of exchange design. With MEV protections, dynamic routing algorithms, integrations, and full stack customizations, Duality is leveraging the Interchain stack to usher in the next generation of exchanges.
Run Strategies with Ease
There are entire teams of brilliant engineers whose core specialization is understanding the logic behind existing AMMs. Duality ends this.
Builders, vault managers, and liquidity providers no longer need to spend countless hours understanding concentrated liquidity and AMM math.
Duality is perfect for sophisticated LPs and teams who want a high degree of control over their capital. LPs can enjoy native limit and range orders, auto-rebalancing LP positions, extremely high capital efficiency, and an orderbook-like UX to run strategies.
With one function call, LPs and teams on Duality can even replicate any feasible AMM curve with the same liquidity pools, opening up an exciting design space of AMM innovation. Instead of reasoning about the code, teams and LPs can spend their time actually executing the best strategies.
Note: if you’re interested in building or running strategies on Duality, dm us on Twitter :)
Sustainable Incentives through MEV Redistribution
Passive liquidity provisioning has become a losing game because arbitrage and price movement take value from passive LPs. The passive LPs that do make money do it at the expense of other token holders through inflationary, unsustainable incentive schemes.
Duality flips this on its head giving by MEV and arbitrage profits back to LPs. On Duality, we hope to make providing liquidity a winning game, and Duality will become the first DEX with sustainable LP incentives. More on this coming soon :)
Native, Natural Capital Efficiency
One of the most important criticisms of AMMs is their lack of capital efficiency. While many AMMs are adopting concentrated liquidity, they are doing so in complicated ways to fit in with their existing approaches and mechanism designs.
Duality has the capital efficiency of an orderbook, and does so cleanly and natively. With Duality's constant-sum pools, traders can enjoy zero-slippage swaps on a single tick for stable coins and related assets, and best-in-class prices on every other asset.
The status quo in AMMs is not only complicated and unintuitive, but dangerous. Complex protocol designs mean the only winners are the most sophisticated firms who learn how to integrate. Crazy APYs and unsustainable incentive schemes mean the average token holder is continuously diluted, creating extreme sell pressure. This is not the financial system we all set out to build.
If crypto makes it to the next step of adoption, it cannot look like this. It’s bad economics.
We at Duality aim to lead the way. As we learned from the Doge of Venice, simple and sustainable financial markets are also the most powerful ones. A new wave of AMM products, financial instruments, and trading infrastructure will be built on Duality, ushering in the next generation of not only crypto, but financial markets generally.
We are excited to be on this journey with the best team in the industry, and a lineup of world-class investors, advisors, and supporters. And of course, we’re beyond excited to partner with our friends in the Cosmos ecosystem.
Duality Labs has finished Duality’s core code logic, are now heavily testing, and will be launching a testnet by the end of the year. Until then, we will be sharing our white paper, documentation, and blog posts diving deep into the technologies that make Duality possible. Duality will launch on mainnet in Q1 2023.