Reimagining the AMM with 1inch Aqua

Tanner Moore

Overview

• Current landscape of DEXes
• What Aqua is and how it reimagines AMM design
• Tools we have built to streamline Aqua development
• Extending beyond AMMs
• Benefits for LPs, traders, and builders alike

Bob (LP)

WETH/USDC

Bob (LP)

WETH/USDC

Bob (LP)

WETH/USDC

Bob (LP)

WETH/USDC

Alice (Trader)

Bob (LP)

WETH/USDC

Bob (LP)

Alice (Trader)

WETH/USDC

Bob (LP)

Alice (Trader)

WETH/USDC

Bob (LP)

Alice (Trader)

WETH/USDC

Bob (LP)

Alice (Trader)

WETH/USDC

Bob (LP)

Alice (Trader)

Alice (Trader)

Bob (LP)

(LP 2)

Alice (Trader)

Bob (LP 1)

(LP 2)

(LP n+1)

Alice (Trader)

?

(LP 2)

(LP n+1)

Bob (LP 1)

Alice (Trader)

(LP 2)

(LP n+1)

Bob (LP 1)

Alice (Trader)

(LP 2)

(LP n+1)

Bob (LP 1)

Outcome

• Liquidity "feels" unified to the user
• In reality, fragmentation accelerated
• Contracts reimplement custody, accounting, settlement, etc.

Drawbacks

Drawbacks

(From an LP perspective)

Drawbacks

• Choosing where to deposit sucks

Bob (LP)

?

Bob (LP)

Drawbacks

• Choosing where to deposit sucks

Drawbacks

• Choosing where to deposit sucks
• LP participation has high opportunity cost

Bob (LP)

Bob (LP)

Bob (LP)

Bob (LP)

DAO

Governance

Bob (LP)

Drawbacks

• Choosing where to deposit sucks
• LP participation has high opportunity cost

Drawbacks

• Choosing where to deposit sucks
• LP participation has high opportunity cost
• Moving funds is high-friction

Bob (LP)

Bob (LP)

Bob (LP)

Bob (LP)

Bob (LP)

Bob (LP)

Bob (LP)

Bob (LP)

Drawbacks

• Choosing where to deposit sucks
• LP participation has high opportunity cost
• Moving funds is high-friction

Drawbacks

• Choosing where to deposit sucks
• LP participation has high opportunity cost
• Moving funds is high-friction
• New projects increase fragmentation
• And materially incentivise it!

Bob (LP)

?

Bob (LP)

?

?

Bob (LP)

?

?

Bob (LP)

Alice (Trader)

Bob (LP)

AMM

Alice (Trader)

Bob (LP)

AMM

Alice (Trader)

Bob (LP)

AMM

Bob (LP)

Alice (Trader)

AMM

Bob (LP)

Alice (Trader)

AMM

1inch Aqua

1inch Aqua

• Liquidity stays in the LP's wallet
• Liquidity is not bound to trading strategies
• Settlement is atomic

Architecture

Architecture

• Aqua Router
• Aqua Apps
• Strategies

Aqua Router

Aqua Router

​

​

• 80-line smart contract
• Responsible for 3 core functions
• LP registrations
• Balances
• Swap settlement

Aqua Apps

Aqua Apps

• Swap logic implementations
• Constant product
• Concentrated liquidity
• Stableswap

Strategies

Strategies

• LP commitments to Aqua Apps
• Constant product, WETH/USDC, 1ETH/1500
• Stableswap, USDT/USDS, 1000 each

WETH/USDC

Alice (Trader)

Bob (LP)

Bob (LP)

Alice (Trader)

Bob (LP)

Alice (Trader)

Aqua Router

Bob (LP)

Alice (Trader)

AMM

Aqua Router

Aqua App

Constant Product

Bob (LP)

Approve/

Permit

Alice (Trader)

Aqua Router

AMM

Aqua App

Constant Product

Bob (LP)

Aqua.Ship(...)

Alice (Trader)

Aqua Router

AMM

Aqua App

Constant Product

Bob (LP)

Alice (Trader)

AMM

Bob (LP)

Aqua Router

AMM

Strategy

Aqua App

Constant Product

Bob (LP)

Alice (Trader)

(emit)�strategy data

AMM

AMM

Bob (LP)

Aqua Router

Strategy

Aqua App

Constant Product

Bob (LP)

Alice (Trader)

(emit)�strategy data

Indexer�(offchain)

AMM

Bob (LP)

AMM

AMM

Bob (LP)

Aqua Router

Strategy

Strategy

Aqua App

Constant Product

Bob (LP)

Alice (Trader)

Indexer�(offchain)

Bob (LP)

AMM

AMM

Bob (LP)

Aqua Router

Strategy

AMM

Strategy

Aqua App

Constant Product

Bob (LP)

Alice (Trader)

Bob's balance information

Indexer�(offchain)

Bob (LP)

AMM

AMM

Bob (LP)

Aqua Router

Strategy

AMM

Strategy

Aqua App

Constant Product

Bob (LP)

Alice (Trader)

Indexer�(offchain)

Bob (LP)

Quote

AMM

AMM

Bob (LP)

Aqua Router

Strategy

AMM

Strategy

Aqua App

Constant Product

Bob (LP)

Alice (Trader)

Indexer�(offchain)

Bob (LP)

AMM

AMM

Bob (LP)

Aqua Router

Strategy

AMM

Strategy

Aqua App

Constant Product

Bob (LP)

Alice (Trader)

Verify Bob's commitment

Indexer�(offchain)

Bob (LP)

AMM

AMM

Bob (LP)

Aqua Router

Strategy

AMM

Strategy

Aqua App

Constant Product

Bob (LP)

Alice (Trader)

Indexer�(offchain)

Bob (LP)

AMM

AMM

Bob (LP)

Aqua Router

Strategy

AMM

Strategy

Aqua App

Constant Product

Bob (LP)

Alice (Trader)

Indexer�(offchain)

Bob (LP)

AMM

AMM

Bob (LP)

Aqua Router

Strategy

AMM

Strategy

Aqua App

Constant Product

Bob (LP)

Alice (Trader)

Indexer�(offchain)

Bob (LP)

AMM

AMM

Bob (LP)

Aqua Router

Strategy

AMM

Strategy

Aqua App

Constant Product

Bob (LP)

Alice (Trader)

Indexer�(offchain)

Bob (LP)

AMM

AMM

Bob (LP)

Aqua Router

Strategy

AMM

Strategy

Aqua App

Constant Product

What do we get?

What do we get?

• LPs can send/sell committed tokens whenever
• LPs can participate in governance
• LPs can reuse tokens for other Aqua apps / strategies

Bob (LP)

Bob (LP)

$1000

$1000

$1000

$1000

Bob (LP)

$4000

Bob (LP)

Aqua Router

Bob (LP)

Aqua Router

$1000

$1000

Bob (LP)

Aqua Router

$2000

Bob (LP)

Aqua Router

Bob (LP)

$2000

$2000

Bob (LP)

Aqua Router

Bob (LP)

Bob (LP)

$2000

$2000

$2000

Bob (LP)

Aqua Router

Bob (LP)

Bob (LP)

$2000

$2000

$2000

$4000

Bob's actual liquidity:

Bob (LP)

Aqua Router

Bob (LP)

Bob (LP)

$2000

$2000

$2000

$6000

$4000

Bob's effective liquidity:

Bob's actual liquidity:

Bob (LP)

Aqua Router

Bob (LP)

Bob (LP)

$2000

$2000

$2000

Bob (LP)

Alice (Trader)

AMM

Aqua Router

Bob (LP)

Bob (LP)

$2000

$2000

$2000

Aqua App

Constant Product

Bob (LP)

Aqua Router

Bob (LP)

Tony (Trader)

Bob (LP)

$2000

$2000

$2000

Alice (Trader)

AMM

Aqua App

Constant Product

Bob (LP)

Alice (Trader)

Aqua Router

Bob (LP)

Craig (Trader)

Tony (Trader)

Bob (LP)

$2000

$2000

$2000

AMM

Aqua App

Constant Product

Aqua Router

Bob (LP)

Craig (Trader)

Tony (Trader)

Bob (LP)

$2000

$2000

Large trades in same block

AMM

Aqua App

Constant Product

Aqua Router

Bob (LP)

Craig (Trader)

Tony (Trader)

Bob (LP)

$2000

$2000

Large trades in same block

AMM

Aqua App

Constant Product

Constant Product

Aqua App

Concentrated Liquidity

Aqua App

Stableswap

Aqua App

Stableswap

Aqua App

Constant Product

Aqua App

Concentrated Liquidity

Aqua App

Stableswap

Constant Product

Concentrated Liquidity

Aqua App

SwapVM

SwapVM

• Building block functions for swaps
• Price curves
• Taker restrictions
• Fees
• Deadlines

Constant Product - Aqua App

Constant Product - SwapVM

SwapVM

• Building blocks are opcodes under the hood

SwapVM

• Building blocks are opcodes under the hood
• Can call to external contracts for additional data
• Oracle data

SwapVM

• Building blocks are opcodes under the hood
• Can call to external contracts for additional data
• Custom opcodes can be written*

Aqua extends beyond AMMs

Aqua Apps extend beyond AMMs

• Prediction markets
• Privacy pools
• Flash loans

Aqua Apps extend beyond AMMs

• Prediction markets
• Privacy pools
• Flash loans
• SwapVM can be used in most projects!

Bob (LP)

Alice (Trader)

AMM

AMM

Bob (LP)

Aqua Router

Strategy

Aqua App

Constant Product

Bob (LP)

Alice (Trader)

Flash Loans

Flash Loans

Bob (LP)

Aqua Router

Strategy

Aqua App

Bob (LP)

Alice (Trader)

Flash Loans

Flash Loans

Bob (LP)

Aqua Router

Strategy

Borrow amount + payload

Aqua App

Bob (LP)

Alice (Trader)

Flash Loans

Flash Loans

Bob (LP)

Aqua Router

Strategy

Verify Bob's commitment

Aqua App

Bob (LP)

Alice (Trader)

Flash Loans

Flash Loans

Bob (LP)

Aqua Router

Strategy

Aqua App

Bob (LP)

Alice (Trader)

Flash Loans

Flash Loans

Bob (LP)

Aqua Router

Strategy

Aqua App

Bob (LP)

Alice (Trader)

Flash Loans

Flash Loans

Bob (LP)

Aqua Router

Strategy

Execute flash loan payload

Aqua App

Bob (LP)

Alice (Trader)

Flash Loans

Flash Loans

Bob (LP)

Aqua Router

Strategy

Aqua App

Bob (LP)

Alice (Trader)

Flash Loans

Flash Loans

Bob (LP)

Aqua Router

Strategy

Aqua App

Bob (LP)

Alice (Trader)

Flash Loans

Flash Loans

Bob (LP)

Aqua Router

Strategy

Aqua App

Bob (LP)

Aqua

Flash loans

Bob (LP)

Aqua

Constant Product

Bob (LP)

Aqua

Stableswap

Bob (LP)

Aqua

Flash loans

Bob (LP)

Aqua

Constant Product

Bob (LP)

Aqua

Stableswap

Impact on the DeFi market

Impact on the DeFi market

• For LPs
• Higher utilization of funds / better yields
• For DeFi users
• Better prices for DeFi apps
• For builders
• Fast path to production / users

Bounties!

• Build a new Aqua app on 1inch
• $5000 split across top 3
• Extend an existing app to include Aqua
• $2000 split across top 2

Thank You

Get Hacking!