Upstart market maker Swaap goes live with new version on Ethereum, Polygon

Swaap introduces a quotation model that is run off-chain, making it possible to run more complex computations


Anatoli Styf/Shutterstock modified by Blockworks


Swaap protocol has launched the v2 of its non-custodial market making infrastructure on Ethereum mainnet and Polygon.

As of May this year, the protocol had just over $2 million total value locked in its contracts, with majority of the tokens denominated in wETH, wBTC and USDC. Swaap’s second version officially went live on July 10 and drew over $1 million in pool liquidity within the first day.

Balancer, the dominant protocol in the automated market maker (AMM) space, boasts $1.1 billion in total liquidity.

Swaap itself is a fork of Balancer v2, but with a twist. Swaap’s quotation model — which checks the recent sale price of any traded assets — is run off-chain, and there is an additional settlement module that has been added to run authenticity and performance checks on quotes.

For users, this means that it is cheaper to use Swaap than other market makers, as its AMM strategies are not dependent on on-chain networks such as Ethereum, Cyrille Pastour, co-CEO and cofounder of Swaap Labs told Blockworks. 

That’s a potentially notable development given the long-standing issue of transaction costs on networks like Ethereum, particularly during periods of heavy activity. 

Pastour said that running off-chain quotes improves the performance of market making strategies. 

“Oracle data are updated several times per second compared to once every 27s at best on-chain,” Pastour said. 

This means that it will be possible to run more complex computations and adapt to market conditions in real time.

Of course, there are always risks involved with off-chain management. Pastour acknowledged three in particular: corruption of price data sources, so-called “fat-finger” errors in models, and malicious actors who could seize control of the quotation module. 

To mitigate these risks, Pastour said Swaap has a rigorous internal control system and follows strict cybersecurity practices. It also utilizes on-chain safeguards that help mitigate risks and limit LP exposure to unforeseen events.

“Swaap v2 employs several pioneering on-chain safeguards, including max imbalance, last look, and max drawdown mechanisms. These protections shield LP funds during extreme market conditions and potential malicious attacks,” he said.

Max imbalance relies on a mechanism that reverts trades which imbalance a pool, and LPs can easily check their imbalance risk exposure. Last look is a tool that is used to reject trades that have quotes which deviate too far from on-chain prices. 

“Max drawdown is our most innovative mechanism,” Pastour said. “It’s a pool-level stop loss. If a trade causes a loss for LPs of more than x% of the pool value in a given time duration, the transaction will be reverted. The x% is an immutable parameter, deployed in the smart contract of the pool. It has been fixed at 4% every 24 hours for the first pools deployed on Swaap.”

Max drawdown is also used as a defense layer from exploitation of the trading function, Pastour explained. Setting a percentage limit on the total amount of funds an attacker can drain. 

“These pioneering mechanisms enable v2 to ensure pool security even amid highly volatile market conditions. It provides robust defense against malicious attacks and extreme scenarios,”  Pastour said.

Don’t miss the next big story – join our free daily newsletter.


Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

Mon - Wed, March 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience: Attend expert-led panel discussions and fireside chats Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts.

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Research report - cover graphics (1).jpg


In this report, we dive into crypto private market data to gather insights on where the future of the industry is headed. Despite a notable downturn in private raises, capital continues to infuse promising projects that aim to transform payments, banking, consumer experiences, community, and more, with 2023 being the fourth-largest year for crypto venture capital.


Revolut said that the standalone crypto exchange is currently “invite only”


The stock price jump comes after Coinbase reported ending its seven-quarter run of net losses during the fourth quarter


BUZZ holds shares of Coinbase, Robinhood and MicroStrategy


Opinion: Even though I didn’t pay for my “Diamond Hands” burger with BTC, don’t let that fool you into thinking that crypto’s development is futile


The results mark “a major positive inflection point,” one analyst says, as the exchange carries net income momentum into a crypto rally


While the slate of 10 US spot bitcoin funds have tallied $4.6 billion of net inflows thus far, half of the field is lagging the leaders