Genius Yield has Launched on Mainnet!

Episode by Peter Bui on December 15th, 2023

The Genius Yield DEX, a highly anticipated order book decentralized exchange (DEX) on the Cardano blockchain, has officially launched after two years of building. I still remember the initial posts about the ISPO.

Genius Yield differentiates itself with unique features and opportunities for users, including the absence of impermanent loss, a common concern in other DEX models.

One of the standout features of Genius Yield is its true peer-to-peer order book model. Unlike Automated Market Makers (AMMs) prevalent in other DEXs, Genius Yield allows users to place limit orders at specific prices, offering greater control and flexibility in trading. This model is more akin to traditional financial markets and addresses the limitations of AMMs, particularly around impermanent loss. In Genius Yield, trades occur directly between buyers and sellers without pooling liquidity, thereby eliminating the risk of impermanent loss.

Users can engage with the DEX in various ways, such as running Smart Order Router (SOR) bots or Market Maker bots. These bots facilitate efficient market operations; SOR bots identify arbitrage opportunities by matching different orders, while Market Maker bots help maintain liquidity by placing orders on both sides of a trading pair. Importantly, operating an SOR bot does not require capital investment, as these bots earn through trade fees.

Another key aspect of Genius Yield is the staking of GENS tokens, the platform’s native token. Stakers can earn a share of the DEX’s trading fees, amounting to 20% of the total fees collected. This model aligns the interests of GENS token holders with the success of the DEX, as the rewards are tied directly to the platform’s trading volume.

The DEX’s launch follows rigorous testing phases, including alpha and public testnets, which provided valuable user feedback that led to significant improvements. The team at Genius Yield has prioritized user experience and intuitive design, ensuring the platform is accessible to a wide range of users.

Regarding security, the DEX has undergone a thorough audit with plans for further audits to ensure robustness and safety for its users. Looking ahead, the team at Genius Yield is focused on optimizing the DEX’s off-chain operations and exploring innovative ways to integrate the DEX with other decentralized applications (dApps), leveraging its unique order book model for deeper composability in the DeFi space.

Learn 2 Earn with the Launch of Genius Yield

Learn 2 Earn with Learn Cardano and Genius Yield

The celebrate the Genius Yield launch, we have put together a campaign to help you share the launch news and learn about the platform. Step through the Learn Cardano Zealy quests and get full marks in the Genius Yield online quiz to potentially win a share of the prize pool.

Good luck and congratulations to the Genius Yield team on launching the DEX.

Text Transcript

00:00
The time has finally come, the Genius Yield DEX, the order book DEX on Cardano has finally launched. In this interview I talk with Marvin, the Chief Science Officer from Genius Yield, talk through a couple of things about the DEX itself. We go through a little bit of reflection and how the process has been over the last two years in regards to developing the DEX. We talk about some of the unique features from the order book style DEX as well as the lack of impermanent loss.

00:28
That’s a really cool feature. We also talk about the alpha test net phases that the team went through the last month and also what you should expect from this particular launch. So if you’re trying it out now, we go through all those aspects so you know exactly what to expect when playing around with the DEX. We also talk through smart order routers and market maker bots and how you can actually become a smart order router yourself and process some of these transactions on the DEX.

00:56
to match the orders that are coming through. We also talk about the fee revenue sharing on the DEX as well. So if you’re wanting to stake your GENS tokens, take advantage of this so that you can earn some of the fees that pass through the DEX itself. Really easy to do and probably an entry point for a lot of users on the DEX. All this coming right up. So let’s get into it.

01:17
Yeah, gotta do it like that. You’ve been listening to the Learn Cardano podcast. Gotta get it hype. Crypto is what we like. But this is not investment or financial advice. Gotta do your research because it’s risky. We know it is. This show is educational and it’s informative. Crypto’s the future really. It ain’t no debate. So this is an exciting one. Genius Yield.

01:39
is in the process of launching. This is super exciting and I have Marvin here joining me to talk about the launch and everything else that has happened leading up to this launch. So I’m pretty excited to have Marvin on to talk about this. Marvin, welcome back to the podcast. Yes, very exciting times and yeah, thank you for inviting me. Looking forward to like tell you all about it. So let’s start off with a reflection a little bit. I remember it was about two years ago, around this time, around Christmas as well.

02:08
the ISPO was launching and the articles and everything else was going around it. Can we have a look back over the last two years of this journey of building and launching Genius EOD? Yeah, absolutely. Two years ago, the Cardano space was quite a different place. We’ve just had smart contracts and people were coming to the realization of the complexity and

02:33
the difficulties around building DAPs and just getting used to this new paradigm, which is the UTXO. We always thought that UTXOs had a lot of potential and are very powerful to create innovative DAPs that are, in terms of design, are very different from EVM. But it did take a maturation stage to really get to a good place. You’re now seeing the past six months, we’ve never seen that many DAPs on the ecosystem launching, which is great.

03:03
background for Junior Sealed, right? We really had to build a lot of things from scratch. A lot of these tooling that maybe if we’re outside building right now, it would be very different. One core tool that we’re very proud of is Atlas, right? Atlas till this day is probably the most mature and advanced Haskell off-chain code, pap framework. There are other great frameworks, you know, in TypeScript and coming in other languages.

03:31
But yeah, we’ve kind of really put a lot of effort in building that Haskell backend, which is used across all our applications and is used by other projects and dev shops like MLabs to power other dApps. So we’re happy with that. It’s an ongoing project. At the core, the vision of Genius Shield hasn’t really changed. It’s an order book, pure order book DEX that is really decentralized peer to peer.

04:00
and really leverages the benefits of UTXOs. But as we build through this, we’ve actually had to go through multiple iteration of our architecture. And in a way, we’ve kind of built the DEX twice internally. We built it the first time and we made certain assumptions and then we’ve learned from that experience and had to refactor a lot of the code, which is very normal in a normal software life cycle.

04:29
typical life cycle of these products. And maybe that’s why it took longer than we thought, but we didn’t want to launch with a sub-par product or product that was built on architecture that we thought was not the right approach. And so that iteration process really helped us be fine, get it to a place where we’re happy now that we’re ready to kind of show it to the public and launch it to the main net.

04:56
Yeah, the last thing you’d want to do is launch a subpar product, especially with so much anticipation around the DEX and everything else around it. Now we’ll probably need to just step back a little bit. And for those people that don’t understand the idea or concept of order book DEX is how does that differ from what people are normally used to in the market at the moment? Yes. And I mean, it’s an interesting way to put that question because what actually people are used to in the traditional market is order book. So the order book.

05:24
designed for exchanges is the standard across the world for traditional finance. And with the onset of Ethereum and the EVM paradigm, this new kind of protocol design came to be, which is the AMM, which a lot of us got interested in to finance to the AMM. And we kind of assume the AMM model is the default model, but it’s actually the newer model. So we’re not inventing something completely new.

05:53
taking the patterns and the lessons of the traditional market and applying that to Cardano. The main difference is that it’s a truly peer-to-peer DEX. By order book is that you have a set of bids. These are like people wanting to buy a certain token or asset and then ask people willing to sell it for a certain price. Then the price of that asset is simply the price.

06:22
interaction between the bid and the ask. And so the price is an emerging property of the order book and allows you to be extremely dynamic and have different, we call liquidity curves based on the market conditions, right? You could have a lot of buy pressure, which would push the depth of the order book in a certain direction or a lot of sell pressure. And people can then manage their equity much more flexibly. And that’s what you find in professional exchanges. The pool.

06:50
AMM pool had a lot of advantages. It was really built because people tried to build an order book on EVM and it’s just computationally infeasible because of the global state. So they had to come up with a different design that was more adequate for the EVM architecture, which then you have this concept of pools. So this pools, everyone pools the same liquidity and the liquidity is kind of mixed together. You get those LP tokens so that the protocol remembers which liquidity is yours. And then you’re kind of forced to

07:20
trade among this constant product liquidity curve, which works okay in practice, but is not a great way to model markets and doesn’t give you any flexibility on having more like integrate the market condition and the market sentiment into the price curve. And so a lot of people want to bring order books back to web three and the UTXO model, I think is a great way to showcase the power of UTXOs by

07:49
bringing those kind of more advanced tax features into Web3. I do like the order book model. It’s where I started practicing trading on exchanges and then coming over to the EVM side of things and trying to understand liquidity pools and then impermanent loss and how you can suffer from that as well. Now, from what I understand, genius yield doesn’t have that type of impermanent loss because as you explained, there’s no pools.

08:18
It’s just a peer to peer matching of orders. Can you talk a little bit about that and explain to users how that sort of liquidity works and why there’s no permanent loss? Yes, so there’s no permanent loss, but I also wanna be clear that it doesn’t mean you can’t make losses, right? You’re still trading, and if you trade against a price that then skyrockets, you may have sold at a lower price than you would have, right? So it’s all about trade-offs, and it’s about understanding the trade-offs.

08:47
And sometimes it’s hard to wrap your head around what pool trade-offs are. You can think of pool a bit like an index fund. You know, in an index fund, you have to keep the same ratio of multiple stocks. Right? Let’s say you have four stocks and they’re all at 25%. Whenever one of the stocks increase in value and the value now goes up to 30%, then you need to kind of rebalance that stock. So you sell the stock that’s more expensive.

09:15
and then buy back stocks that are a bit cheaper to get back to that 25-25. That’s exactly what a pool is. Maybe people should be thinking more that way. You have to maintain that 50-50%. What ends up happening is whatever asset is increasing in value, you are selling the one that is increasing value and you are buying the one that is low in value. You end up in the end with the asset that is actually lowering in price.

09:42
And that’s what impermanent loss is, is that you’re just selling the most viable asset to maintain that 50-50. It’s not necessarily bad if you want to balance your portfolio and allows you to correct for volatility, but it’s often not what people want. So you need to have an option to do something else. And so the order book is you place an order at a specific price. And if the price is not at that level, your order doesn’t get filled. If that price is costed at that level, your order gets filled.

10:12
So it’s, I think, more intuitive to understand. And it’s basically you get to choose at what price you want your order to get filled. And you can place your bets where, let’s say I have tokens on both sides. And I can say, I want to act like a market maker. So I would say, I’m going to buy a token below the market price. And then I’m going to…

10:41
create a sell order above the market price. Right. So then if both of those orders get filled, then I’m buying a token at a lower price and I’m selling it at a higher price and that’s called the spread. And so I can now as a liquidity provider, kind of control a little bit how I’m still able to provide liquidity from both sides, but now I’m able to make sure that I’m getting that spread and making profits from providing liquidity. That’s a, it’s, it’s really good to have that explanation there. I like that explanation of that balancing of the.

11:10
liquidity on the actual pool itself. So thank you for that. Now, in regards to your alpha and your test net phase, how was it received? I jumped on myself. I played around with it a lot and it all made sense to me. But there was a lot of feedback during that time. And I know you guys were working very busy over the last month or so making changes and updates. Yes, absolutely. So basically we had two test nets, the alpha test net and the public test net.

11:39
And it’s just incredible, like the, you know, your best, your best source of innovation and creativity is actually through your users and your use case. And, you know, we’ve been head deep into building this thing and we have a certain idea of how people would use it. And we made some good choices, but when we went through the test, I, we also realized that a lot of things had to be changed and updated and I’m actually quite proud of the team for.

12:05
We made quite a bit of changes and upgrades based on the user feedback. We took the feedback very seriously. There was too much feedback for us to kind of all process, but we really had to prioritize and find the most impactful one to, one, make the DEX more intuitive, increase the user experience to be good while maintaining the ethos and kind of like the operational vision that we had for this DEX. So, yeah, it’s been extremely valuable and…

12:33
I think I would recommend any projects built on Cardano to get to a public test net or even a private public test net with few people to get that feedback, real life feedback and kind of iterate based on like evidence of the market, as opposed to trying to figure out how everything can go wrong. You know, I think it’s always better to just be like data driven. And yeah, I think it’s been a great experience and our DEX is significantly better because of it. Likewise. I put a lot of feedback in as well. So.

13:02
It was good to always collaboratively work with the community around those type of aspects. Now, with the launch, what should people be expecting to see? I noticed yield farming wasn’t enabled when I was playing around on Testnet. And so at launch, we will have our order book DEX, so be able to place limit orders at whatever price you want, buy and sell orders.

13:29
And you can also create kind of like a time in force. So you could schedule a limit order into the future. If you don’t want to place it right away, it will be on chain, but it won’t be able to be executed. And then you can also have orders that expire. So after a certain time, if your order doesn’t get filled, it will expire and no one can match it. We have also market orders that will allow you to

13:58
basically get the best available price that is on the DEX to be filled directly. And then we’ll have both our smart order routers and our market maker bots open sourced to the community. So at the core, Junior Seal DEX is purely like community run. Once the contract is launched, apart from the front end, the actual entire operation of the

14:26
of the DEX is done by the community. So maybe I can explain what these are. So you have the first one is the SOR, smart order routers. These are essentially what would replace batches in an AMM DEX. But instead of being centralized and have kind of like this capability to reorder orders and potentially apply slippage against the will of the user.

14:53
these bots are simply finding arbitrage trades. So similar, like I was saying, if someone is selling for higher than someone is buying, then this bot will then pick those two trades, match them together. And then whatever the residual of that trade is, is what they get paid with. So a nice thing out of that is that no one is paying the batches or the SORs, right? There’s no SOR fee.

15:22
You put your orders in the marketplace and the SORs are kind of fending for themselves to find arbitrage opportunities. And then they are kind of fighting with each other to match, to find arbitrage and be the first one to submit it. And because of the UTXO, you can’t have that all spent. So it’s okay if multiple people build the same transaction. It’s only the SOR that is the fastest that will get that trade in and get that arbitrage and they’ll be paid like that. So you can imagine.

15:51
the development of a community of SORs, each developing their own different strategies in finding ways to outbid each other in terms of speed and performance to match those orders and make profit. And there’s nothing that we can do to stop them from matching these orders. So that’s fully decentralized. And then we have the Market Maker Bot. The SORs have been actually open source and they’re available right now. The Market Maker Bot will be open source very soon.

16:20
And that’s around providing liquidity. So since we don’t have pools, people have to place them in orders. But in more traditional markets, you also have market makers that have a lot of liquidity from both sides of the pair, and they’re constantly placing buy and sell orders to kind of make sure that the order book has maintained a certain level of liquidity. And that’s improved capital efficiency. That improves the smooth execution of orders.

16:49
and allow regular people like us to just place orders and have them filled. But those market orders, those market makers have a clever way of placing their liquidity so that they also find a way to, like I was saying, be able to sell at a higher price and buy at a lower price. And so this bot will be run by Genius Seal to maintain our pools, but it will be accessible for anyone to just…

17:16
come up with their own strategies and become equity providers in any pool that they wish. Super exciting to see that level of decentralization of the operation of the DEX. I’m really, really excited about that. So I can run an SOR, Smart Order Router, myself. Is it really technical to do or can I fork something off GitHub, clone it locally, run it on a server and should be up and running with a bit of tweaking?

17:45
Yes, so we have a Docker file, right? So Docker container, if you know, just run a Docker container, it will just run it for you. And then you can pass in a API key from my store API key that will just give you the on-chain data and that’s basically it. And then you can run it. And the nice thing with SORs is you don’t need money to run it, right? It’s you’re supposed to make money from fees. Your SORs doesn’t need, doesn’t need tokens.

18:10
It’s different for the market makers. This is more for LPs that do have liquidity that they want to earn yield on. And so for market makers, you would still, you will need to provide your liquidity. But that’s just kind of like a different ballgame. All right. I better get my SOR up and running then. The other thing about this is you do have some sort of fee sharing as well. I read a post about this just the other day. Can you explain how this fee share works within the platform? Yes. So.

18:40
And I would say that’s probably the main utility of GENs. You want a token that generates some kind of yield, but not a yield that increases supply because that’s just an inflationary kind of yield. And we’ve seen what it does. You may have a temporary pump of your token in a bull market, but over the long term, even most EVM tokens, they just…

19:09
they just decrease in value because you’re just printing your way into the yield. The way you should do it, it’s a bit like you need to only pay out what you’ve earned. Right? So the yield should be proportional to the fee collected on the platform. And that’s how Genius Sealed works. The more fees we collect, the more GEN

19:36
and you will get 20% of all the fees generated on the DEX, we just shoot it to the stakers. And so if you’re one of the first stakers right now and there’s less competition, right? Then you get a high proportion of the fees. So as more and more stakers come in, right? You’ll have to share it. But right now is actually a good time to stake because whatever fees get generated in next month will be distributed to you guys. A key differentiator is…

20:05
Because we charge fees in the token that is offered when you place an order, that means fees collected in a bundle of tokens. Basically, any token that’s being traded on the DEX, we collect fees in that. So that fee that you’re getting is not just ADA or GENs, it’s in every token of the DEX. Wow, okay. And then you get to choose which one you can reward. So we won’t send them to you if there are certain…

20:33
tokens you just don’t want to have in your wallet, but you’ll basically see your rewards in your staking platform and that will be in every single token of the DEX being traded. Obviously, the pools that generate the most volume, for example, party stable coins, you will get stable coin rewards. That is also neat to get those fees in all these tokens. Maybe one last thing is that we’ve slightly…

21:02
Different topic, but the way we’ve designed you placing a limit order is that we’ve kind of made it a mango address so that whatever stake pool you’re staking to, you will stay staked in as you place a limit order. So you could have a limit order that just stays on the order book for a month. That ADA is still generating ADA rewards to the pool in your wallet. And that’s because we don’t pool your ADA into…

21:30
into a single UTXO, every user has their own UTXOs. And so we can maintain that staking address, which I think should be used much more often on Cardano. DeFi protocol should not on stake your ADA when you place it in DEXs or lending. And if people did use a more UTXO based peer-to-peer approach, they would be allowed to like, allow people to do that. What we have right now instead is that now we have to create DAOs on top of pools.

22:00
so that whatever that staking reward from ADA is generated is now governed by this DAO, right? But it’s kind of creating additional complexity on top of it when it’s not needed, if you didn’t pool everyone’s liquidity into one UTXO. All right, some really interesting things there. So first off, back to the earning of the 20% fee. So all I need to do right now is click on earn.

22:28
and then stake those Gen tokens, and I am entitled to the 20% fee share, correct? Yeah, that’s right. Right, super easy. And any of the ADA, just want to clarify, any of the ADA that I’m putting into orders, limit orders at the moment, will be continuously staked to the pool that I’m at. So all that decentralization of the ADA state still continues and still happens. Yes. And if you change stake pool in your wallet, it will also change

22:58
the state pool in your limit. Wow, that’s cool. That’s a really nice little feature. And I agree, everyone should be using that. Every DEX, every DeFi protocol out there should be using that as well. That’s a really good extra to note. Now, what about security? I know you guys partnered up with Tweak over a year ago in regards to audits and improving Haskell code and everything around it. Has the DEX been audited? I don’t know.

23:26
I don’t know the status of that. Can you give us a rundown of security on the DEX? Yes, so we did a deep audit with Tweak, which is a very reputable audit firm. And so we went through multiple iterations of iterating on the runabouts that they found, and we had to fix a couple of things, but we felt really good about the smart contracts. We do plan to do another audit very soon. We’ve had to make some small changes since the test nets from the public.

23:56
And we’ve been very careful to add changes that we’re really confident about. But just for transparency, we do need to do a second audit very soon after the launch, which is planned. Okay. That’s really good to know as well. So what’s next on the cards for Genius Yield? What happens after now that you’ve guys have launched and what’s happening in 2024 for you guys?

24:26
Yes, well, I can’t talk too much about the details. I think right now our main focus is really getting the DEX on main net and optimize a lot of these off-chain operations. So we do expect a bit of a ramp up, you know, because it’s community, it’s built for the community and basically run by the community, it will take some time for people to build their own SOR bots and optimize them. We provide the first situation, but

24:56
There’ll be always a way for them to improve and kind of function better. Same thing for the market maker bots. So we’ll keep pushing improvements to the market maker bots to make it really easy for any liquidity providers to provide liquidity and make profits on the DEX. We have a lot of more ambitious changes down the line that we can really talk about, but you can imagine a little bit what we’re thinking about. But in the short term, we’re going to focus on

25:26
Dex reward redistribution. So that’s not completely finished, but by the months after the launch, we’ll be able to start doing the redistribution of the fees. And another thing that we’re adding is be able to batch multiple orders when you’re doing market orders. So right now, when you do a market order, it will match you to a single order on the order book, which is a bit of a limitation. But yeah, within the weeks after that, you’re able to batch multiple transactions and allow

25:56
much larger market orders by just scooping up multiple limit orders on the order book. All right. I’m looking forward to what you guys come out with in 2024. You’re kind of teasing there. So maybe I can dig a little bit deeper and try and get some of those details out. Is there anything else that you need to add before we round up this interview? Yeah, just try it out. It’s a different model. So it will feel different from other DEXs.

26:23
and it will require your participation. It’s a DEX where the community can really be empowered to build things on top of it. We are actually talking to other projects, not DEXs, but like in the NFT space or in other projects that find Genius Shield very easy for composability. Because it’s permissionless, you can then…

26:50
buy things and in the background start doing swaps by directly accessing the order book. So it opens up a lot of possibility for deep integrations and composability with other dApps that could leverage the swapping features under the hood without anyone knowing. So for example, you could create an e-commerce platform where you could pay in USDC and in the background it’s trading at USDC into ADA by pinging.

27:19
finding a limit order on the genius seal dex that fits that price, the current price. So in a single transaction, you’re able to do that swap. Whereas all dexes, you need two transactions to do a swap. You first have to submit to the batcher and then you need to wait for the batcher to process your transaction. So it breaks composability and so it prevents a lot of dexes to be integrated even into lending protocols. So I think what I would love to see is people

27:49
especially, you know, devs and people in the space that understand how these permissionless audible can be leveraged to kind of build things on top of it and innovate because there’s a lot there’s a lot we can do and it’s just kind of like this is just the basic building block of a more like mature and exciting DeFi space. Wow, okay, that’s amazing. I’m pretty sure a couple of devs or some builders out there are pretty excited.

28:16
and would love to leverage some of that tech and primary building box that you guys have built. How can we get in contact with you? Where should we go to get started? Yeah, I mean, the great way is to start with our Twitter’s, you know, you get the latest updates, you get all the news and discussions and you check out, you can check out our website, geniuscl.co and yeah, we’re on Discord, we’re on Telegram, we have a very active community. Don’t hesitate to hit us up. All right.

28:46
Brilliant. I’ll put all the links and references in the show notes down below and I’m going to go off and start my SOR right now. So Marvin, thank you for joining me again on the podcast and sharing everything around the launch of Genius Yield. Yeah, my pleasure. Hopefully you guys enjoyed that interview. We do have a launch campaign going on at the moment. Links down below in the show notes for you guys. You can see the reference video that talks about the campaign as well.

29:13
All you need to do is go over to the Learn Cardano Zealy page. You’ll be able to find all the details there. Do a really in-depth quiz. Educate yourself about the DEX and participate in that and you’ll be able to earn from the 4000 GENS Token prize pool and that will be rewarded to the top participants in this campaign. Good luck to anyone that is wanting to participate in that. Now if you enjoyed this interview, please make sure you give me that thumbs up, click that subscribe button.

29:42
Hit that notification bell there as well and I’ll see you in the next video.

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