QuickSwap Explained

17 July 2023

7m read


On the Polygon Network, QuickSwap is an Automated Market Marker. It offers the same liquidity pool model as Uniswap and is a duplicate of it. Users add token pairs to liquidity pools, where they can then earn transaction fees from other users who use the pools to swap tokens.
The popularity of QuickSwap can be attributed to the Polygon Network's fast service and affordable prices. Additionally, it works with the Ethereum network, enabling the exchange of ERC-20 tokens. However, there is always a chance of temporary loss.
QUICK is the name of QuickSwap's cryptocurrency. Using the liquidity pools of QuickSwap, you can also exchange other tokens for QUICK.

How does QuickSwap operate?

The LP (liquidity pool) tokens that serve as payment for the liquidity providers' portion of the pool are given to them in exchange. The LP tokens are destroyed when you get your tokens. In yield farming, where your fees are continuously reinvested in the pool to compound your interest, you can also give them to a third party for use.

What does impermanent loss mean?

Anyone who contributes liquidity to a liquidity pool may run the risk of experiencing temporary loss. You will receive less money when you withdraw if the tokens' price has changed since you added them. Keep in mind that this happens whether the prices increase or decrease. Since you don't actually experience the loss until you withdraw your money from the liquidity pool, it is temporary.

How does QuickSwap generate revenue?

In contrast to a centralized exchange, QuickSwap doesn't earn money through user fees. Transaction fees are really earned by liquidity providers. utilizing a liquidity pool incurs a 0.3% cost, the same as utilizing Uniswap. You are always welcome to claim earned transaction fees and even reinvest them. You will be compensated with fees based on your share of the total liquidity.

Concluding remarks

Another decentralized token trading choice is offered by QuickSwap. Compared to Uniswap or another Ethereum network AMM, you can trade ERC-20 tokens quickly and cheaply with a Polygon address and some MATIC tokens. This appealing feature, though, might only be available temporarily. In terms of fees and performance, QuickSwap might become less competitive with Ethereum 2.0 when it is released.

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