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TeddySwap: Stablecoin Decentralized Exchange on Cardano

Peter Bui - Learn Cardano Podcast

Episode by Peter Bui on April 3rd, 2023

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TeddySwap is a decentralized exchange (DEX) built on the Cardano blockchain, focusing on stablecoins trading. The platform’s creation stems from the belief that Cardano’s scientific approach and meticulous implementation make it the most decentralized and secure platform for cryptocurrency and future financial systems. TeddySwap aims to capture a significant market share of Cardano’s growing stablecoin ecosystem as the DeFi sector expands.

TeddySwap is led by experienced developers and project leads, contributing to the growth of the Cardano ecosystem. The platform’s launch comes at an optimal time, with Cardano poised for rapid stablecoin growth and at least five stablecoins launching in 2023.

The TeddySwap Team

In this interview with the team, I have 3 key prominent people in the Cardano and Ergo ecosystem join me to talk about TeddySwap.

  • Austin (aka Frosty) from AnetaBTC,
  • Marty from ErgoPad and Paideia and
  • Michele from Harmonic Labs / Plu-TS.

Unfortunately, Clark Alesna, the core developer working for the Cardano Foundation and dcSpark could not make it at for the interview.

TeddySwap’s Unique Position

A DEX allows peer-to-peer trading without a central authority, offering increased security, privacy, and reduced reliance on third parties. However, liquidity and impermanent loss are common challenges faced by traditional DEXs, especially for smaller, lesser-known cryptocurrencies. TeddySwap addresses these issues by focusing on stablecoins, which are pegged to fiat currencies or other assets, thus reducing price volatility and impermanent loss risk for liquidity providers.

Focusing on stablecoins offers several advantages:

  1. Stablecoins are the pillar of flourishing cryptocurrency ecosystems, representing most of the liquidity in the market.
  2. Cardano is on the brink of rapid stablecoin growth.
  3. Liquidity providers can earn conservative and stable yield due to reduced impermanent loss risk.

By concentrating on stablecoins, TeddySwap incentivizes liquidity for common stable pairs and promotes a DeFi environment with reduced risk. As stable assets typically have high trading activity, TeddySwap can potentially see active trading volume, leading to passive rewards for liquidity providers.

The whitepaper outlines TeddySwap’s design, features, roadmap, and team, as well as the benefits it offers to users.

TeddySwap’s Invariant Calculations

TeddySwap’s Invariant Calculation is a critical component of the platform’s Automated Market Maker (AMM) system, ensuring that the value of assets in the liquidity pool remains constant during trades. The invariant formula calculates the product of token balances and is designed to minimize slippage and maximize capital efficiency. It allows for more efficient price adjustments and accurate pricing of assets while maintaining the overall pool value. In contrast to traditional constant-product AMMs, TeddySwap’s invariant calculation is optimized for stablecoin-focused pools, reducing impermanent loss and providing better returns for liquidity providers. The platform’s careful design and implementation of the invariant calculation contribute to a more robust and efficient decentralized exchange experience for traders and liquidity providers in the Cardano DeFi ecosystem.

The formula that TeddySwap uses is:

A(x + y) + (x * y) = AC + (CĀ²/4)

This formula helps reduce slippage, increase capital efficiency and allows for lower impermanent loss.

TeddySwap Tokenomics

Token Distribution Visual Breakdown
Token AllocationNumber of Tokens% of Total SupplyCliffEmission Length (MONTHS)
FISO25,000,0000.50%
INO FISO Bonus25,000,0000.50%12 Months
INO Token Sale150,000,0003.00%3 Months3 Months
INO LBE Bonus50,000,0001%12 Months
Liquidity Bootstrapping Event100,000,0002.00%
DAO Treasury250,000,0005.00%
Marketing / Airdrops25,000,0000.50%
Team & Advisors500,000,00010.00%6 Months36 Months
Developer Fund250,000,0005.00%
Yield3,625,000,00072.50%60 Months

Note: these are projections, and some numbers are subject to change a bit. Adjustments can happen in the following ways:

FISO Bonusā€‹

The FISO bonus is contingent on the number of NFTs held by stakers during the FISO rounds. Stakers will obtain a percentage bonus on their FISO rewards for each NFT they hold. The rarity of the NFT will also impact the bonus value associated with each NFT. The tranche figure is an approximation and may be subject to adjustments based on the bonuses distributed.

INO Token Saleā€‹

The Teddy Bears Club represents an exclusive NFT collection offered during TeddySwap’s Initial NFT Offering (INO). Club membership grants participants enhanced FISO rewards, increased TEDY token allocations, and augmented returns from yield farming as well as the liquidity bootstrapping event.

LBE Bonusā€‹

The Liquidity Bootstrapping Event (LBE) Bonus will resemble the FISO bonus, with each NFT corresponding to a percentage bonus, and rarer NFTs providing additional enhancements to the bonus value.

Learn More about TeddySwap

You can find more information about TeddySwap on their website https://teddyswap.org