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Concepts

Concentrated Liquidity​

Concentrated liquidity is allocated within a custom price range. Liquidity providers may allocate their capital to relatively narrow price intervals. As a result, traders benefit from deeper liquidity around the mid-price, and liquidity providers earn more trading fees on their capital.

Liquidity Shape​

Bidask allows users to provide liquidity with a variable number of tokens in each bin — what we call a custom shape of liquidity, all within a single transaction.

This feature enables liquidity providers to manage liquidity distribution more efficiently, allowing flexible configuration of the desired average price of position and potential impermanent loss, tailored to their financial strategy.

Although the custom shape can take any form, Bidask offers the most popular liquidity shapes as ready-made setups: spot, curve, and bid-ask shapes.

  • Spot is a flat shape of liquidity, just like on conventional DEXes.
  • Curve concentrates the majority of assets in the direction of the active price, enabling earning more fees during periods of low volatility while maintaining a wide range overall.
  • Bid-ask, on the other hand, concentrates liquidity further from the active price, increasing income during high volatility.

Market Making Algorithm​

The pricing mechanism is based on the constant product formula, which can be illustrated by a curve, where X stands for the amount of reserves of one token and Y represents reserves of the other token.

Bidask Protocol implements an algorithm where the price generally only moves as much as the user swaps, including the fee. Thus, the fee is considered in both assets, which slightly reduces volatility and bin change frequency. In this method, it is also unnecessary to find virtual assets.

For full explanation please refer to the [White Paper].

Bin Step​

The entire price range is divided into bins, which can be described as liquidity containers representing specific price intervals within the pool. The size of each bin is determined by the bin step, measured in basis points (bps) of price change. The bin step functions similarly to the tick spacing in the Uniswap protocol and defines the price movement between the boundaries of adjacent bins. It can be set to any value, but there are three options in the interface:

  • 0.05% for stable pairs
  • 1% for common pairs
  • 3% for memecoins

Specifying the bin step is important for more efficient liquidity providing.

If some custom bin step is required, the Bidask team can create a pool with any bin step. To do so, please contact us.

Fees​

The primary type of commission is the LP fee — a fee earned by liquidity providers (LPs) based on the trading volume that utilizes their liquidity. The fee is deducted from the tokens received by traders as a result of a swap.

Fees are distributed proportionally among all active liquidity positions within the bin that contains the active price. If the active price moves outside the bin range of a liquidity position, that position becomes inactive and does not earn fees.

The LP fees are automatically reinvested into the pool, so users do not need to claim them manually.

Bidask allows liquidity pool creators to select the LP fee. There are three options available in the interface during pool creation:

  • 0.05% for stable pools
  • 0.3% for common pools
  • 1% for specific pools (e.g., recently airdropped tokens with limited supply)

If some custom fee is required, the Bidask team can create a pool with any fee. To do so, please contact us.

The protocol fee is applied on top of the LP fee and is currently set at 0.1%.

Price Impact​

Price impact refers to the change in an asset’s market price caused by the execution of a trade on a decentralized exchange. Since prices on DEXs are determined by the ratio of tokens within liquidity pools, the size of a trade directly affects the asset’s price.

The magnitude of price impact depends primarily on two factors: the size of the trade and the liquidity depth of the pool. The estimated price impact is shown in the transaction details.

Price Slippage​

Price slippage refers to the difference between the expected price of a trade and the actual price at which the trade is executed. This discrepancy occurs because the market price can change between the moment a trade order is placed and when it is finalized. Unlike price impact, which is mainly caused by the size of the trade relative to pool liquidity, slippage accounts for external market movements and timing issues.

The estimated price slippage is shown in the transaction details. To control the maximum acceptable price deviation, traders can set slippage tolerance. Additionally, employing limit orders can help reduce the effects of slippage and improve trade execution outcomes.

Safe Mode​

Bidask implements a Safe Mode that is enabled by default to protect users from excessive price deviations while spot swapping. If a trade would result in a price shift higher than 5%, Safe Mode automatically cancels the transaction to prevent unexpected losses. The 5% cap accounts for the combined effect of both the price impact and price slippage. Safe Mode may be disabled by the user, but doing so involves accepting the associated risks.

Partial Execution​

Partial execution refers to a situation where a trade order is only partially filled, meaning that only a portion of the requested asset amount is bought or sold. As a result of such a transaction, a trader will receive both tokens of the traded pair corresponding to the executed portion of the order.

Partial execution can be enabled or disabled in the transaction settings. It may occur in the following cases:

  • Insufficient liquidity to complete the entire transaction at the desired price
  • Reaching the slippage tolerance limit set by the user
  • Triggering the Safe Mode cap designed to protect against excessive price deviations

In these scenarios, the trade executes only up to the feasible amount, while the remaining portion is refunded. This mechanism helps optimize trade execution by allowing partial fills when full execution is not possible, but also protects traders from unfavorable conditions that could lead to excessive losses.

Limit Order​

A limit order on a decentralized exchange (DEX) allows traders to specify the exact price at which they want to buy or sell an asset.

One important element when creating a limit order on Bidask Protocol is specifying the Reward. This reward is an incentive paid to a third party who executes the limit order on behalf of the trader. Since on a DEX limit orders can only be fulfilled by someone, the executor incurs blockchain transaction fees (gas fees) to complete the trade.

Currently, the reward can only be paid in TON tokens, but the list of accepted assets will be expanded in the future. It is recommended to set the reward to at least 0.5 TON to ensure timely execution of the order.

Additionally, limit orders can be executed partially, and this setting is enabled by default. Partial execution means that the third party can gradually swap the desired token according to the current market liquidity and capacity.

Limit orders can also have an expiration time, after which the order is automatically canceled. In this case, the trader can reclaim the full amount of the reward and the tokens they intended to sell.

Another important element of a limit order is the reserve. This is a small amount of gas (TON) that is reserved to guarantee the successful delivery of the transaction result back to the trader’s account. Usually, this reserved gas is not used during the process, and the trader receives the full amount back afterward.

All parameters of a limit order can be reviewed in the transaction details before submitting it.