In the fiercely competitive landscape of Automated Market Makers (AMMs), Ekubo has arrived and immediately established itself as a dominant player in Starknet’s DeFi ecosystem.
A(MM) force to be reckoned with
Ekubo protocol is an AMM that maximizes capital efficiency through its unique combination of concentrated liquidity and extensibility within a singleton design, all optimized for Starknet.
Since the day of its launch, Ekubo has absorbed the majority of all trade volume on Starknet. Here’s why Ekubo is crushing the competition:
One of the keys to Ekubo’s success is concentrated liquidity, a feature first introduced with Uniswap V3. Concentrated liquidity allows liquidity providers (LPs) to specify the price range in which they would like to provide liquidity. By customizing these price ranges, LPs can optimize the deployment of their capital within liquidity pools, increasing capital efficiency and flexibility.
The advantages of concentrated liquidity extend to Ekubo traders as well. The enhanced efficiency of LPs results in improved pricing. Everybody wins.
Thanks to Ekubo's smaller tick size (which relates to the maximum capital efficiency of a position), Ekubo often offers better pricing than Uniswap on Ethereum.
But how does this look in practice?
Consider this example: when swapping 100,000 USDC into USDT on Uniswap, you receive 99,955 USDT. In contrast, Ekubo (via AVNU) gives 99,968 USDT – that's $13 more for the exact same swap.
And when you factor in the low fees of the Starknet network, the efficiency of Ekubo becomes even more pronounced. Users not only experience better trade rates but also save on transaction costs.
Also central to Ekubo’s future success is its singleton design. By using this design Ekubo is able to consolidate all pools within a single smart contract. Ultimately, this will result in a lower cost for liquidity fragmentation, allowing liquidity to be aggregated from many pools to offer even better pricing.
Extensions are another area where Ekubo truly stands out. They allow developers to create custom pools according to the precise requirements and preferences of LPs, introducing a level of flexibility and innovation previously unseen in the AMM space.
With extensions, developers can build oracles, new order types (e.g. limit orders), yield-boosted pools, privacy solutions, and much more. For more information, check out Ekubo’s docs on extensions.
Ekubo's pioneering work on extensions establishes it as one of the most powerful AMMs, not only on Starknet but across the entire cryptocurrency industry.
How to use Ekubo
To become a liquidity provider (LP) in Ekubo you need to create a position. Ekubo has a detailed user guide on how to add liquidity to one of their pools, but we’ll go through them here as well.
Creating a position
Go to https://app.ekubo.org, choose your pool, and click the plus (+) to begin creating a position.
1. Select the base and quote tokens
In Ekubo, base and quote tokens represent the price of your position.
Base Token: This is the token you're either buying or selling. For instance, in the ETH/USDC trading pair, where you're purchasing ETH, ETH becomes the base token.
Quote Token: The quote token is used to track the value of a position, and it is how the base token's price is displayed. In the ETH/USDC example, USDC acts as the quote token, meaning that you’ll see the price of your position as $.
The base and quote tokens are interchangeable, and you can swap them around on the next page.
Fee tier: The fee is how much you charge swappers for each swap, and the precision is how specific you can be with your pricing.
2. Select the lower and upper price range
Let's illustrate this with an example, using ETH as the base token. In this scenario, with ETH priced at $1569, you set a lower threshold at $1500 and an upper threshold at $1600.
If ETH's price falls below $1500, your entire position will be converted into ETH. Conversely, if ETH's price surpasses $1600, it will convert into USDC.
The capital efficiency of a position depends on the range between the lower and upper price bounds. A narrower range results in higher capital efficiency.
3. Add your liquidity
Let's continue with our ETH/USDC example. Enter the quantity of ETH you wish to add to the liquidity pool; the USDC amount will be filled in automatically. Complete the process by clicking 'Add liquidity' and signing the transaction.
An NFT representing your position will be generated and sent to your wallet. If you decide to withdraw 100% of your liquidity, the ‘Ekubo Position’ NFT will be burned. Note: This NFT is your liquidity position, and its value corresponds to your position on Ekubo. Selling the NFT for less than the value of your position will result in a loss.
1. Access your positions
Open the Ekubo app and click on "Manage Liquidity." This action will redirect you to the positions page, where you can manage your positions.
2. Choose the position to withdraw from
Locate the position you wish to withdraw from, then click the icon on the right-hand side that resembles a pen and paper. This will allow you to view your position details.
3. Complete the withdrawal
Within the position view, select "Withdraw," confirm the percentage of liquidity you want to withdraw, and then click "Confirm."
You'll receive a transaction request to sign, finalizing the withdrawal of your liquidity. Withdrawing 100% of the assets will also burn the position NFT.
When you withdraw liquidity from Ekubo, you will be charged a fee equivalent to the swap fee of your chosen pool. For instance, if your fee rate is 0.3%, your withdrawal from Ekubo will incur a 0.3% fee. The rationale for the withdrawal fee is explained here.
Starknet's AMM Evolution
With the arrival of Ekubo, the AMM landscape has well and truly changed.
By offering superior swap execution and better returns for liquidity providers, Ekubo has firmly positioned itself as a major player in Starknet’s ecosystem and garnered attention across the entire industry. Ekubo serves as a shining example of the exciting future of DeFi on Starknet.