What Is StellaSwap? Low-Slippage Trading on Polkadot

What Is StellaSwap?

StellaSwap is the one of the largest DeFi apps and the leading DEX on Polkadot, offering low-slippage trading and a full suite of DeFi features including yield farming, liquid staking, 1-click crosschain swaps, and more.

Key Takeaways

• StellaSwap is one of the first AMM decentralized exchanges (DEXs) on the Moonbeam parachain network. It is powered by the STELLA token. 

• StellaSwap is the leading DEX on Polkadot with a cumulative volume of $1.7 billion to date.

• StellaSwap has also received liquidity incentives from the Polkadot DAO and the Moonbeam network, so users can look out for high APRs on StellaSwap pools!

• Beyond swaps, StellaSwap offers other services such as liquidity farming, liquid staking solutions, crosschain swaps and CEX onramps. 

StellaSwap is one of the largest decentralized finance (DeFi) applications on the Moonbeam parachain network on Polkadot. According to the project, StellaSwap has a cumulative volume of $1.7 billion, with $4.7 million in TVL based on data from DefiLlama at time of writing. The importance of StellaSwap to both the Polkadot and Moonbeam networks has not gone unnoticed; Polkadot recently awarded 1 million in DOT liquidity incentives (~USD$7 million) to StellaSwap to spearhead the growth of Polkadot, while Moonbeam also awarded 1.35 million GLMR to StellaSwap in liquidity incentives. 

This means that as users will be enjoying high APRs on StellaSwap, and with both programs expected to go live in August, there’s no better time to get started with StellaSwap.

Introducing StellaSwap

StellaSwap is an AMM decentralized exchange on the Moonbeam network, enabling users to swap crypto assets directly from their wallets without requiring any deposits to a centralized intermediary. StellaSwap is a leading DEX in the Polkadot ecosystem, and has listed almost all Polkadot native projects to allow for easy discovery. 

By building on Moonbeam, which is an EVM-compatible parachain, StellaSwap makes it easy for users to bridge their assets to Moonbeam from any supported EVM network. This means you can easily connect your EVM wallet, like MetaMask, and easily execute a cross-chain swap from Ethereum to Moonbeam with a single click. 

Beyond decentralized swaps, StellaSwap offers additional features that makes it easy for users to execute multiple DeFi activities on the same platform to overcome the challenges of liquidity in the DeFi space. This includes spearheading native asset liquidity, CEX onramps, yield farming, liquid staking, and other passive income programs. . 

StellaSwap has also partnered with other projects in the Polkadot ecosystem and outside to bring advanced features to the platform. Active partners include Beefy Finance, Algebra Finance, and Axelar.

StellaSwap synergizes several decentralized protocols, economic principles, and administrative practices to achieve a dynamic and scalable platform that is capable of serving the growing number of crypto traders and investors on Polkadot and Moonbeam. Here’s how StellaSwap works;

How Does StellaSwap Work?

Like other decentralized exchanges powered by automated market makers (AMMs), StellaSwap uses non-custodial liquidity pools to create a store of supported assets from which it serves trade requests from users. Anyone can become a liquidity provider by committing their assets to a liquidity pool, and they will earn a share of the trading fees based on their contributions. 

As part of its V3 upgrade, StellaSwap introduced concentrated liquidity, a decentralized exchange model used first by Ethereum-based DEX Uniswap. Concentrated liquidity is seen as the most efficient model for the decentralized exchange of assets on AMM DEXs. 

StellaSwap has officially acquired the license for a variation of concentrated liquidity AMM from Algebra, the team that developed Uniswap V3’s codebase. With Algebra’s dynamic fee model, yield optimization is built into the staking process so users do not need to actively move their liquidity between pools to earn the highest rewards. 

Now let’s take a closer look at how concentrated liquidity on StellaSwap works and how it reduces slippage and impermanent loss, while improving capital efficiency.

Concentrated Liquidity

In the usual liquidity provision procedure, liquidity providers are simply required to lock up equivalent amounts of the paired asset in the pool. This means that these assets can be used to satisfy swap requests at any time and price level. However, in this case, the liquidity pool’s capital is distributed across the whole price curve, which is inefficient as most of the deposited capital goes unused since most trading occurs within a narrow price range.

With concentrated liquidity, liquidity providers can select a custom price range, and ‘concentrate’ their liquidity in a specific price range to maximize capital efficiency. Liquidity providers who provide deeper liquidity for ranges where trades occur will earn a higher share of fees and rewards on their capital deposited. 

However, this comes with an increased risk of impermanent loss, as you can fall out-of-range, which occurs when the current market price falls outside of your initial price range that you set when adding liquidity. Once you fall out of range, you will cease to earn trade fees or farm rewards, so utilizing concentrated liquidity requires you to manage your positions so you stay within range. 

In order to help users mitigate impermanent loss and optimize their earnings, StellaSwap has launched auto-vaults via Beefy’s newly-launched CLM so users can automate their V3 staking. StellaSwap has also launched a V3 notification bot via Telegram to help users be notified when their positions go Our-of-Range.

StellaSwap Features

Now, let’s look at some key features of StellaSwap.

 Swap

StellaSwap offers non-custodial on-chain crypto asset swaps on Moonbeam, as well as cross-chain swaps utilizing AMMs and liquidity pools. StellaSwap supports almost all Moonbeam and Polkadot native projects, making it easy for users to discover projects in the Polkadot ecosystem. 

StellaSwap also offers cross-chain swaps. Users can perform direct exchange of assets across supported networks from the swap interface. StellaSwap partners with Axelar and Squid Router to bring this feature to its platform. The cross-chain bridge is built on Axelar’s cross-chain messaging protocol; it provides cross-chain bridging service to every network supported by Axelar, while Squid Router handles the routing process. StellaSwap’s cross-chain swap facility supports over 25 blockchain networks, including Ethereum, BNB Chain, and Cosmos.

Pool

Liquidity pools are essential to StellaSwap’s operations, enabling the AMM to serve trade requests and manage assets locked on the platform. On StellaSwap, holders of supported assets can contribute to the platform’s liquidity by committing their assets to the pool. There are no time locks on assets committed to the liquidity pool, so liquidity providers can remove their assets from the pool at any time. New projects can also create liquidity pools for their assets at will and enable trading immediately.

Liquidity providers are incentivized, through the trading fees generated from the pools they provide liquidity for. On top of these fees, Polkadot DAO and Moonbeam have also awarded grants to StellaSwap to boost liquidity on the platform. These grants will be committed to rewarding liquidity providers on the platform. As part of the reward program for Liquidity providers, extra rewards in STELLA and GLMR (MoonBeam) tokens are distributed. To receive a share of these ecosystem liquidity incentives, liquidity providers are simply required to stake their LP tokens on the reward pools of the pair for which they provided liquidity and enjoy high APR.

To improve the liquidity for tokens on the network, StellaSwap introduced the Initial Liquidity Offering (ILO) program. ILO is a strategy to attract liquidity from other networks to the MoonBeam network. This program includes discounted sales of the STELLA token as a means to lure holders of other networks’ native tokens to the platform. As part of the ILO strategy, StellaSwap allocates an amount of STELLA token to each ILO program. Participants will be required to bridge the native token of another network to MoonBeam and purchase STELLA tokens at a 20% discount (using the bridged asset). 

Revenue from each ILO program is allocated to the StellaSwap treasury. StellaSwap has conducted three ILO programs to date for Avalanche (AVAX), Fantom (FTM), and Polygon (MATIC) and raised over $4.7 million in the process.

StellaSwap has also partnered with Beefy Finance, a leading multi-chain yield optimizer which allows users to simplify their staking process in V3 to maximize their earnings through automation.

Stake

StellaSwap features a staking portal for LP tokens and single-side staking for STELLA tokens. Liquidity providers will receive additional rewards when they stake the LP tokens in respective pools. Users who wish to provide liquidity but possess only one of the assets in the pair can use the ZAP feature to enter the liquidity pool without purchasing the quote or base asset, which enables users to enter liquidity pools with just one token. USDC holders who wish to provide liquidity in the USDC/GMLR pool can simply ZAP their USDC for USDC/GLMR LP. ZAP will be integrated into StellaSwap V3.

STELLA token holders can also lock up their assets in the single-side staking portal for STELLA and receive xSTELLA. xSTELLA is a yield-bearing token, it accrues value over time, allowing stakers to exit the pool at will with more STELLA tokens than they initially staked. APR for the STELLA staking program is over 19% at the time of writing.  

Bridge

StellaSwap strives to build a connection between the Moonbeam network and other networks, including the Polkadot network and applications in both ecosystems. In line with this goal, it operates several bridging facilities that enable asset transfers. They include;

Native XCM transfer: Polkadot consists of many parachains, of which Moonbeam is one. StellaSwap enables users to swap assets between the MoonBeam network and other Polkadot parachains via the native XCM transfer bridge. XCM bridge is integrated into the StellaSwap interface and connects users to tools needed to deposit assets to Moonbeam from other Parachains or withdraw assets from the network.

Multichain bridge: StellaSwap offers cross-chain swaps on its exchange portal. Users can directly exchange assets across supported networks. In addition, StellaSwap users can also access the PortalBridge platform from the platform’s interface, using PortalBridge to bridge assets to other supported networks.

Gas Swap: Through the Gas Swap feature, StellaSwap simplifies the onboarding process for new MoonBeam network users and existing users who accidentally ran out of GLMR tokens for paying gas fees. Gas Swap enables users to swap any of the supported tokens to GLMR. This transaction is free of gas fee payments but comes with a 2.5% fee. According to the project, it saves users the stress of obtaining GMLR for gas payments via other means, like purchasing GLMR from a centralized exchange.

CEX OnRamp: StellaSwap partners with Cede Labs for the CEX OnRamp feature. This feature allows users to easily send and track assets from centralized exchanges to their self-custody MoonBeam network wallets.

Liquid Staking

StellaSwap has launched a liquid staking portal for DOT tokens. Liquid staking lets users stake their DOT in exchange for a liquid staked derivative tokens that represent their staked DOT which they can then use in DeFi. StellaSwap users can now stake their DOT tokens on the liquid staking portal and receive stDOT, the derivative token for liquid-staked DOT. 

stDOT can be staked on supported single-side staking portals and can also be used to provide liquidity on decentralized exchanges. Over 1.1 million DOT tokens are staked on the StellaSwap liquid staking portal at the time of writing. It currently offers an APR of over 18%. The stDOT/DOT pool is also supported on StellaSwap. stDOT holders can receive additional rewards when they provide liquidity with their stDOT and stake the LP token on the portal. 

Stablecoin Lending

StellaSwap also offers decentralized lending on its platform. Users can mint the MAI stablecoin against their assets. Assets supported on the lending protocol are GLMR and xSTELLA. Holders of these assets can obtain loans using them as collateral. To mint MAI using these assets, users are required to lock their assets in a vault and mint MAI based on the presiding collateral ratio. 

What Is the STELLA Token?

StellaSwap is powered by the STELLA token. It is the native token of the project and is integrated into the core operations of the platform. STELLA is vital to the economic aspects of the project. Initiatives such as the ILO, liquidity incentives, and promotional activities are powered by STELLA. STELLA token holders can also enjoy financial benefits by staking their STELLA. Staked STELLA – xSTELLA – is a yield-bearing token, accruing more value over time. As part of the incentives for staking STELLA, xSTELLA holders receive a share of the platform revenues and vote to boost the incentives for supported farming pools.

STELLA token doubles as the governance token of the platform, where xSTELLA holders make up the project’s DAO. They are eligible to vote on improvement proposals.

xStella holders are also eligible for gas refunds. Gas refund reimburses users the whole or a percentage of the gas fee paid for transactions on the platform. The percentage of refund depends on the amount xSTELLA held by the user. 

STELLA Tokenomics

According to the project, the STELLA token was launched via a fair launch. A total of 500,000,000 tokens were minted on the Moonbeam network. 70% of this supply is allocated to protocol emissions. About 35,000 STELLA tokens are distributed daily through liquidity provision incentives. 10% of the total supply was allocated each to the project’s treasury, ecosystem growth, and development. The token distribution is expected to last for a period of 3 years. STELLA only trades on the StellaSwap at the time of writing. See active trading pairs for STELLA.

Conclusion

StellaSwap opens the gate to the Polkadot ecosystem, Moonbeam network, and networks beyond it. As a DeFi platform, it offers an essential service to users on the Polkadot and Moonbeam ecosystem by offering low-slippage swaps and bridging between other platforms. Moreover, as Moonbeam is EVM-compatible, it’s easy for users to bridge into StellaSwap with its cross-chain swap feature. StellaSwap has also partnered with other leading protocols like Beefy, enabling their users to simplify and automate the staking process. 

While StellaSwap is a powerful tool for users to capitalize on the potential of DeFi, users need to be aware of the risks involved, such as the potential of impermanent loss. Always do your own research before investing any capital, and never invest more than you are comfortable with. This article is only for educational and informational purposes and should not be taken as financial advice.