Now that BaoSwap and YetiSwap are just around the corner, I’d like to make a suggestion:
For synths it is very important to have an exchange platform with high liquidity and low exchange fees. DEX’s concept of using liquidity pools is not optimal for synths. Highly volatile synths in particular would have a lack of liquidity, as the IL can be very high.
My suggestion is a decentralized order book exchange. The current trading fees at DEX’s on Ethereum are 0.3% and on Binance Smart Chain (BSC) 0.2%. An order book exchange should in comparison have fees of 0.1% or less. The fees should be paid in BAO, or if you fork the exchange to other platforms, then e.g. YETI.
In order to reach a high liquidity, there have to be incentives for keeping orders active which are close to the market price. This can be reached by distributing a part of the transaction fees to the holders of orders. For example, you could distribute 70% of the transaction fees to the holders. The remaining 30% go to a community fund or are used for other purposes that have yet to be defined.
The fees are only distributed to orders that exist for at least one whole block. Orders that are fulfilled in the same or the next block do not exist for an entire block. 50% of the rewards go to holders of buy orders, the other 50% to holders of sell orders. Buy orders with an offer of $ 0 do not receive a reward, nor do sell orders that asymptotically approach infinity. The closer an order is to the market price, the higher the share of the fees they receive. Income is calculated and paid out per block based on the transaction fees paid. So the longer an order remains active, the more fees can be generated. This would finally also lead to a more stable ecosystem.
The order book exchange cannot run on Ethereum due to the block time. Suitable chains I know would be Polkadot, xDai and BSC. Programming this feature is certainly not easy and might require additional programmers. I think it could boost the BAO ecosystem to a whole new level and complement the synths.