Diffusion Finance Review

What is Diffusion Finance?

Diffusion Finance is an open-source AMM-based DEX built on Evmos leveraging liquidity pools to perform seamless trades of crypto assets.

The protocol was launched on the Evmos mainnet in April 2022 with the ultimate goal of becoming the flagship AMM for Evmos and helping to bootstrap liquidity for Emvos-powered projects.

Diffusion Finance has been forked from Uniswap, and as its predecessor, the protocol is implemented as a set of non-upgradable and permissionless smart contracts with all the services open for public use with no possibility for the team to selectively restrict access to users.

How does Diffusion Finance work?

Diffusion Finance is an automated market maker based on liquidity pools where token pairs are valued through a standard constant product formula "x*y=k", where x and y stand for equal amounts of assets contained in a liquidity pool, while k stands for the constant amount of liquidity in a pool.

The protocol’s liquidity pools are maintained by liquidity providers who are rewarded with LP tokens for their contributions representing their share of the pool. Users can also create their own pools or import already existing pools.

Diffusion Finance charge a 0.30% fee per trade, 0.25% of which is distributed among liquidity providers in proportion to the size of their share, while the remaining 0.5% goes to the treasury, which buys back the protocol’s native token DIFF as a staking reward for DIFF stakers.

LP token holders can also deposit their holdings into Diffusion Finance farms and earn 45% of the daily DIFF emission.

How to use Diffusion Finance?

Before starting to use the Diffusion Finance app, it is first required to connect a wallet with some EVMOS tokens to cover the transaction fees. The only wallet Diffusion Finance supports is MetaMask. 

If you want to swap tokens, navigate to the Swap section, then select the token pair from the drop-down list or enter the name or contract address of the desired token. You may also set such trading parameters as slippage tolerance and transaction deadline in the Transaction settings. Once done, the transactions have to be confirmed with the Metamask account.

Those wishing to act as liquidity providers, should head over to the Pool section and click on the “Add liquidity” button, then select the token pair to be provided liquidity for and enter the amount for each token. Once deposited, the protocol will yield a corresponding LP token representing the pool share. Once received, LP tokens can be deposited into the Farm section to earn DIFF tokens. Users can also create a new token pair or import already existing pools by clicking the corresponding buttons in the Pool section.

Users can also review all tokens, liquidity pairs, and on-chain transactions that have been connected to Diffusion on the Analytics page.

The DIFF token

DIFF is the Diffusion Finance native token with a maximum supply of 326,515,151 tokens, which is used to reward liquidity providers and DIFF stakers. Further, the token is planned to be used in the protocol’s governance, which is now under development.

38% of the token supply is allocated to liquidity mining incentives; the Diffusion Finance team is getting 21%; in addition to trading fees, 21% of supply goes to DIFF stakers; 8% is used for airdrops; 8% is allocated to the strategic reserve that will be controlled by a multisig DAO owned by the foundation composed of core contributors and some members of the Cosmos community, and 4% are reserved for the community pool that will be controlled by the DIFF holders as soon as the governance is live.

Is Diffusion Finance safe?

Diffusion Finance has not been audited yet and so far has not been subject to any hacking attacks. The team behind the protocols is anonymous.

The project has no white paper and its official documentation is publicly available; its repository is public and accessible on the GitHub page. 

The DeFi Teller team has reached out to the Diffusion finance developers on Discord in an attempt to get the list of smart contracts, however, the request was left on read.

Partners 

Diffusion finance has partnered with bridging solutions like Nomad, Connext, Gravity Bridge, Celer, and Multichain to allow a variety of assets to be seamlessly transferred from other EVM ecosystems to Evmos.  

Diffusion finance has recently partnered with Orbital Apes NFT, an NFT project on Evmos; with this partnership, Diffusion Finance is planning to become a go-to place for the Orbit Apes community to purchase EVMOS.

What’s next?

Diffusion finance is planning to partner with more Evmos projects and help them to bootstrap their liquidity.

Links 

https://docs.diffusion.fi/docs/