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Unlike atomic (one block) trades happening on AMMs today, we expect the trades on TWAMM to be particularly advantageous to long-term investors such as DAOs, protocols, liquid funds, etc, and retail traders who are interested in utilizing DCA to enter/exit positions. Additionally, passive LPs who’ve been craving a full-range AMM since Uniswap V3 can now park their liquidity in TWAMM pools to earn significant returns without active management.
TWAMM competes with DEX aggregators to provide a better fill for traders who are time-insensitive
OTC trading is rife with issues like reliance on a centralized party, lack of transparency, arbitrary pricing, KYC/AML red tape, adversarial, and most of all non-composable. However, OTC desks provide three big advantages over DEXs: lower slippage, zero gas fees, and privacy.
Traditional DEXs require a large amount of liquidity or concentrated liquidity to avoid causing massive slippage in a single swap. Even with a large amount of liquidity, DEXs cannot process massive trades, i.e. $100s of millions, as was the case in Solend liquidation.
Even when massive trades are separated into smaller trades on DEXs, they still may need to find LPs to add new liquidity to the pools to achieve target slippage rates. Protocols often rely on high liquidity OTC desks to address this and other challenges when executing massive orders.
Arbitrageurs source liquidity from external sources to correct TWAMM prices
TWAMMs separate trades into smaller pieces, so the liquidity required to execute swaps without slippage is orders of magnitude smaller. For example, a $100M trade over 10,000 blocks means each sub-order is roughly $10,000. A TWAMM liquidity pool with ~$2M in assets can process these trades with ~1% slippage due to arbitrageurs correcting the price.
Additionally, TWAMMs act like a liquidity sink because they incentivize market participants to source liquidity from external sources (DEXs, Lenders, OTC desks, CEXs, etc), resulting in arbitrage profits by correcting the pool’s asset prices. Even the most liquid OTC desk or DEX is restricted to assets in their order book.
OTC trading can run advanced algorithms and order splitting to get the best fill because they’re not constrained by gas costs. Meanwhile, DeFi’s go-to solution has been to use an aggregator or manually split large orders over multiple blocks into smaller chunks. However, this has multiple drawbacks including gas fees for each transaction, sub-order granularity tradeoffs, a multitude of MEV attacks (sandwich, front running), and human error.
TWAMMs lazy-loads virtual orders to only execute on-chain when participants interact with underlying AMM
In TWAMM, each sub-order is happening virtually in the background and is only executed or written to the chain when a new interaction with underlying AMM happens (swap, mint, burn, etc). Therefore, a long-term swap trader only pays the gas cost of starting, canceling, or withdrawing order proceeds.
Finally, the cherry on top, the pièce de résistance -- private TWAMMs. During our conversations with customers, privacy was a concern that was brought up as a potential drawback of using TWAMMs for large trades, a really useful feature of OTC desks. Although TWAMMs avoid most MEV attack vectors, the current solution to combat copy traders is canceling your long-term swap and restarting at another time.
Identity preserving trading solution leveraging Aztec ZK Rollups