Zealous Swap is positioning itself as the first decentralized exchange (DEX) that will be built on Igra, the Layer 2 scaling solution for the Kaspa blockchain. With a focus on deep liquidity and a sustainable DeFi ecosystem, Zealous Swap aims to provide an efficient and secure trading platform while addressing liquidity fragmentation and user accessibility.
KaspaDaily recently had a test run of the protocol, and the general user experience was intuitive, with seamless navigation and efficient trade execution. This review takes a closer look at Zealous Swap’s current development status, proposed technical architecture, NFT-based fee mechanism, and protocol-owned liquidity model.
Development Progress and Technical Architecture
Zealous Swap is currently in its deployment phase, utilizing a V2 Automated Market Maker (AMM) architecture. Unlike Uniswap V3, which introduces fragmented liquidity through different fee tiers, Zealous Swap consolidates liquidity into a single pool per trading pair. This approach simplifies liquidity provision and ensures deeper liquidity in the nascent Igra ecosystem.
Some key advantages of the V2 model include:
- Unified Liquidity Pools: Reduces price impact and improves capital efficiency.
- Simplified Liquidity Provisioning: No active management required, making it accessible to more users.
- Scalability for Future Upgrades: Leaves room for implementing V3 or other optimizations as the ecosystem matures.
While V2 may not provide the same capital efficiency as concentrated liquidity models, it serves as a solid foundation for bootstrapping initial liquidity in a new ecosystem like Igra.
NFT-Based Fee Mechanism
One of Zealous Swap’s standout features will be its NFT-based fee mechanism. Instead of introducing liquidity fragmentation through multiple fee tiers, the protocol offers a membership NFT that grants lower swap fees.
- Standard users pay a 0.3% fee per trade.
- NFT holders pay a 0.2% fee, a 33% discount.
The fee structure ensures that liquidity providers (LPs) and the protocol treasury receive a fair distribution of transaction fees while rewarding early adopters. Unlike Uniswap V3’s approach, where each fee tier creates separate liquidity pools, Zealous Swap’s mechanism ensures that all trades interact with the same liquidity pool. This model provides additional incentives for high-frequency traders and arbitrageurs, creating natural demand for the NFTs. Traders who exceed a certain volume threshold benefit from significant savings, which could drive secondary market value for these NFTs over time.
NFT Staking and Additional Utility
Beyond the trading fee discount, Zealous Swap plans to introduce NFT staking, allowing holders to generate passive rewards. While the exact mechanics are yet to be revealed by the team, possible benefits will include:
- Revenue sharing from protocol fees (a portion of collected fees redistributed to NFT stakers)
- Governance participation (influencing protocol upgrades and fee structures)
- Whitelist privileges for future Igra-based DeFi projects
- Potential token airdrops
By integrating staking rewards, Zealous Swap aims to create long-term value for NFT holders rather than making them a simple one-time purchase for fee discounts.
Protocol-Owned Liquidity: A Sustainable Model
One of the key concerns for any new DEX is sustainable liquidity. Zealous Swap will tackle this issue by planing to implement a protocol-owned liquidity (POL) model. A portion of trading fees will be allocated to building permanent liquidity reserves controlled by the protocol rather than external liquidity providers.
Benefits of the POL model:
- Long-term liquidity stability: Reduces reliance on temporary liquidity incentives.
- Mitigates risks of liquidity flight: Ensures continuous deep liquidity, even during market downturns.
- Supports strategic trading pairs: The protocol can maintain liquidity for critical assets, even if user-provided liquidity fluctuates.
This approach protects Zealous Swap from the liquidity mercenary cycle that has plagued other DeFi protocols relying on short-term farming incentives.
User Experience: First Impressions from KaspaDaily
KaspaDaily conducted a test run of Zealous Swap, and the initial impressions were positive. The interface is clean, and trading is straightforward. Additionally, providing liquidity and NFT staking were a seamless experience, with a simple deposit and staking models requiring minimal user interaction.
While visual UI/UX improvements as well as advanced analytics and real-time trading insights, are still necessary, the current setup is intuitive and accessible for both experienced traders and newcomers. Additional features may be added in future development stages or upon the protocol’s launch..
Final Thoughts
Zealous Swap presents a well-thought-out approach to bootstrapping liquidity on Igra L2. The choice of V2 AMM architecture makes sense for the early stage of the ecosystem, and the NFT-based fee system introduces a unique way to balance rewards for early adopters without fragmenting liquidity. Furthermore, the integration of protocol-owned liquidity ensures long-term sustainability, addressing a common pain point for many DEXs.
