Swaps

Introduction to Swaps

Token swaps are the core functionality of Zealous Swap, allowing you to exchange one token for another in a completely decentralized way on the Kaspa ecosystem. Whether you're new to cryptocurrency or an experienced trader, this guide will help you understand how swaps work on Zealous Swap.

What is an AMM?

Zealous Swap is an Automated Market Maker (AMM) - a type of decentralized exchange that uses liquidity pools instead of traditional order books to facilitate trading. These pools are filled by liquidity providers who deposit pairs of tokens in exchange for rewards from trading fees.

How Swaps Work on Zealous Swap

When you swap tokens on Zealous Swap, you're trading directly with a liquidity pool rather than with another person. The price you receive is determined by a mathematical formula:

x * y = k

This "constant product formula" ensures that the product of the two token quantities in the pool always remains the same. As one token is removed (bought), the other token becomes relatively cheaper, creating a natural price balancing mechanism.

Understanding Fees

Zealous Swap features an innovative tiered fee structure:

• Standard users: 0.3% swap fee

  • 0.25% goes to liquidity providers

  • 0.05% goes to the protocol treasury

• NACHO KAT NFT holders: 0.2% swap fee (33% discount)

  • 0.17% goes to liquidity providers

  • 0.03% goes to the protocol treasury

This fee structure rewards NFT holders while maintaining deep liquidity for all traders, essential for a new ecosystem like Kaspa.

Price Impact and Slippage

When making a swap, you'll encounter two important concepts:

Price Impact: This represents how your trade affects the token price. Larger trades in smaller pools will have higher price impact.

Slippage: This is the difference between the expected price and the executed price due to changes in the pool between when you submit a transaction and when it executes. You can set a slippage tolerance to protect yourself from unfavorable price movements.

Price Oracle Functionality

Zealous Swap also functions as a price oracle for the Kaspa ecosystem. Like Uniswap V2, it:

• Measures the market price at the beginning of each block

• Tracks a cumulative-price variable weighted by time

• Enables other applications to calculate Time-Weighted Average Prices (TWAPs)

This oracle function provides reliable price data for other dApps building on Kaspa, supporting the ecosystem's growth.

Benefits of Using Zealous Swap

• First AMM DEX on Kaspa: Pioneer the emerging Kaspa DeFi ecosystem

• Deep Liquidity: All liquidity for each trading pair is in a single pool, reducing price impact

• Enhanced Security: Protocol-owned liquidity and insurance fund protect users

• Fee Advantages: Potential for reduced fees through NACHO KAT NFT ownership

• Simple Interface: Easy-to-use platform designed for both beginners and experienced traders