For decentralized exchanges to fulfil their promise of becoming a viable alternative to centralized trading venues, more liquidity needs to be brought on-chain to lessen the impact of large orders.
That’s why we’re introducing Smart Maker as a beta feature to improve execution prices and reduce slippage when opening large positions. While the benefits of this new feature should attract more traders who want to trade with size, it also has the potential to increase the fee revenue for LPs as a result.
Read on to learn more!
What is Smart Maker?
Smart Maker utilizes Over-the-Counter (OTC) trades to deepen liquidity across 4 of the most popular markets on Perp: BTC, ETH, OP and PERP. Prior to introducing this feature, you’d see the position’s entry price, price impact and trading fee at the bottom of the order panel when entering your order size.
Following the launch of Smart Maker, the user interface remains exactly the same. However, traders will also notice that when selecting a direction and inputting a position size, a notification appears above the “Confirm Long”/“Confirm Short” button to inform you when you can get a better price for your order.
The notification also includes a percentage that indicates the difference in execution prices. If a more favorable price cannot be found via Smart Maker, then the order submission process remains exactly the same as what you’re already used to.
How Does Smart Maker Benefit Traders?
The major change is that if there’s not enough liquidity in a certain market’s Uniswap v3 pool when trying to open a large position, then Smart Maker will offer a better execution price and lower slippage.
Let’s say a trader wants to place a large order in the OP market. If the liquidity available in the pool causes too much slippage, then the order is automatically handled via Smart Maker.
What happens then is that a single transaction provides liquidity for the trader in a certain range and executes the order on their behalf. This particular form of liquidity provision is known as Just-in-Time (JIT) liquidity. Given that additional liquidity is added to the pool through JIT and then immediately taken by the trader, they end up with much lower price slippage as well as a better execution price.
Note that users cannot opt out of Smart Maker. If the market’s pool has enough depth for a large order, then an order will be executed as it usually is. However, if the pool’s liquidity is not deep enough to provide favorable execution prices or prevent large slippage, then these orders are automatically submitted via Smart Maker.
Some other advantages for traders include:
-
No gas fees: compared to building or unwinding positions over multiple trades, orders executed through Smart Maker will not need to pay gas.
-
Faster execution: A quicker alternative to time-weighted average price orders (or similar methods) for building large positions.
-
Non-custodial: trades occur on-chain just like they usually would on our DEX.
Keep in mind that the execution is slower as compared to market trades and the feature will not be available for every market on Perp following the launch. But the trader experience will improve significantly, as the difference in slippage for large orders on Perp and centralized exchanges becomes a lot less noticeable.
FAQs
- How can I as a trader take advantage of Smart Maker?
There will not be any change to the UI, so you can submit orders as you usually would. However, to activate Smart Maker, a one-time approval transaction must be executed. Once approved, you can then begin to benefit from improved execution prices and lower slippage for larger orders!
Remember, Smart Maker only applies if a better price can be found using this method, otherwise your order will be executed as normal using the available liquidity in the market’s Uniswap v3 pool.
- Will Smart Maker have any limits?
Each order amount must be between 500,000 USD or lower. There’s also a dynamic limit, where the fulfilment of an order depends on overall market liquidity.
There is no status limit for per-period volume. No matter what the order size or per-period volume is, it will be limited by the buying power of the SmartMaker dynamically.
There’s a per-market limit, with the maximum size of a each order amount for supported markets: ETH: 200K USD, BTC: 100K USD, PERP: 40K USD, and OP: 40K USD.
- Isn’t JIT an economic attack or similar to negative MEV?
No, it isn’t accurate to call it an attack or compare it to negative MEV, since JIT liquidity provision results in better prices for traders. With lower slippage attracts more traders and creates a positive feedback loop for the entire Perp ecosystem.
- Which markets will Smart Maker be available for?
During the initial testing stage, orders will be submitted via Smart Maker for the following 4 markets: BTC, ETH, OP and PERP. You should notice significantly improved execution prices and slippage when opening large positions (>100K USD) in these markets.
- Is Smart Maker going to be a permanent feature on Perp?
The initial release will be a beta feature as an experiment to see how Smart Maker improves the trader experience. Once Smart Maker is running smoothly and there's good performance, we’ll release another update in the near future to improve the trader experience even further.
- Will Smart Maker get liquidity mining rewards?
No, Smart Maker is designed to improve prices execution and slippage. It doesn’t earn any liquidity mining rewards.
If you have any other questions about Smart Maker, reach out on Discord using the link below!