Insulα DEX Pools For Traders 

 ETH ⇄ Insula Trades

ERC20 ⇄ Insula Trades

Set up : you need Metamask installed on Chrome Browser with a positive ETH and ISLA balance.

 

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Insulα DEX Pools 

Disclaimer :

 

Nothing herein constitutes an offer to sell, or the solicitation of an offer to buy, any securities or tokens.

 

Insula enables capital connection and managing using smart contracts which are open source.

Insula does not take custody of tokens and is only a collaborative hub for investors and managers.

 

Insula is not a licensed bank, broker-dealer, investment advisor or an exchange. Insula uses partner protocols (UniSwap, 0x) to power its own ecosystem.

 

💀 This project is in beta. Use at your own risk.

 Uniswap Liquidity

The design architecture of the Uniswap protocol differs to the model found within traditional digital asset exchanges. Most traditional exchanges maintain an order book and use that to match buyers and sellers of a given asset. Uniswap on the other hand, utilizes liquidity reserves in facilitating the exchange of digital assets on its protocol.

The reserves in exchange contracts are supplied by a network of liquidity providers. These liquidity providers deposit an equivalent value of ETH and Insula Token into the corresponding token exchange contract (above).

 

The first liquidity provider to add liquidity to an exchange contract will initially set the exchange rate between ETH and the exchange contract’s associated Insula token. The liquidity provider does this by depositing what they believe to be an equivalent value between ETH and the exchange contract’s Insula token. If the value set by the liquidity provider is not consistent with the wider market, then arbitrage traders will bring the value between ETH and Insula token to an exchange rate that the market deems correct. All subsequent liquidity providers thereafter will then deposit liquidity using the exchange rate at the time of their deposit.​

Become an Insula Liquidity Provider

Anyone who wants can join a Uniswap liquidity pool by calling the addLiquidity function.

exchange.methods.addLiquidity(min_liquidity, max_tokens, deadline).send({ value: ethAmount })

Adding liquidity requires depositing an equivalent value of ETH and Insula tokens into the Insula token's associated exchange contract.

The first liquidity provider to join a pool sets the initial exchange rate by depositing what they believe to be an equivalent value of ETH and Insula tokens. If this ratio is off, arbitrage traders will bring the prices to equilibrium at the expense of the initial liquidity provider.

All future liquidity providers deposit ETH and Insula Tokens using the exchange rate at the moment of their deposit. If the exchange rate is bad there is a profitable arbitrage opportunity that will correct the price.

Parameters

The ethAmount sent to addLiquidity is the exact amount of ETH that will be deposited into the liquidity reserves. It should be 50% of the total value a liquidity provider wishes to deposit into the reserves.

Since liquidity providers must deposit at the current exchange rate, the Uniswap smart contracts use ethAmount to determine the amount of Insula tokens that must be deposited. This token amount is the remaining 50% of total value a liquidity provider wishes to deposit. Since exchange rate can change between when a transaction is signed and when it is executed on Ethereum, max_tokens is used to bound the amount this rate can fluctuate. For the first liquidity provider, max_tokens is the exact amount of tokens deposited.

Liquidity tokens are minted to track the relative proportion of total reserves that each liquidity provider has contributed. min_liquidity is used in combination with max_tokens and ethAmount to bound the rate at which liquidity tokens are minted. For the first liquidity provider, min_liquidity does not do anything and can be set to 0.

Transaction deadline is used to set a time after which a transaction can no longer be executed. This limits the "free option" problem, where Ethereum miners can hold signed transactions and execute them based off market movements.

 

 Liquidity Provider Fee 

Fee Structure 

The Uniswap fee structure for trades executed on the protocol are as follows:

  • ETH to ERC20 trade: 0.3% fee paid in ETH

  • ERC20 to ETH trade: 0.3% fee paid in ERC20 token

  • ERC20 to ERC20 trade: 0.3% fee paid in ERC20 token (for ERC20 to ETH swap) and 0.3% fee paid in ETH (for ETH to ERC20 swap).

 

Breakdown:

 

For Ethereum to Insula Swaps:

 

There is a 0.3% liquidity provider fee to swap from TokenA to ETH on the input exchange.

 

For Insula to other ERC20 Tokens Swaps:

There is a 0.3% liquidity provider fee to swap from Insula to ETH on the input exchange.

 

There is another 0.3% liquidity provider fee to swap the remaining ETH to ERC20 Token.

const exchangeAFee = inputAmountA * 0.003

const exchangeBFee = inputAmountB * 0.003

Since users only inputs Token A, it can be represented to them as:

const combinedFee = inputAmountA * 0.00591

 

 

 

  

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