Beware the Yeti: YetiSwap Explained
YetiSwap is an Automated Market Maker (AMM) and decentralized exchange (DEX) that operates on the Avalanche blockchain, facilitating asset exchanges and swaps between varying Avalanche subnets. Designed around decentralization, YetiSwap is a completely crowdfunded platform, and community governance is foundational to how this AMM DEX operates.
This project leverages the Avalanche blockchain’s incredibly efficient finality to execute fast and cheap trades while maintaining a fair and open token distribution. As for a native governance token, YetiSwap’s ticker is $YTS, and it is used for all platform participation. YTS was fully community-distributed and is issued through both the Ethereum and Avalanche networks.
In this explainer, we will look at AMMs, $YTS tokenomics, distribution, vesting, NFTs, and more. Firstly, however, we need to explain how Market Making on a DEX works, so that we can show you how YetiSwap’s AMM (a type of DEX), operates.
Market Making on DEXs Explained
Every cryptocurrency exchange, no matter whether it’s Binance, Coinbase, or YetiSwap, functions through the use of liquidity pools. How an exchange accesses its liquidity pool determines how efficiently it can execute trades and fulfill orders. Put simply, orders are asset trade requests and can either be submitted as a buy order, where an investor wishes to purchase an asset, or a sell order, where an investor wishes to liquidate an asset.
Decentralized Exchanges (DEXs), use order books to settle orders and execute trades. These order books are a centralized record of all submitted buy and sell orders for a specific asset and are stored on a blockchain. They execute trades by sorting through every order until a match is found - this is called Market Making.
To give an example, let’s say an investor wants to purchase 1 ETH. The order book receives this buy order and sifts through its records until it finds an investor selling 1 ETH. Once the buyer and seller are matched, the order book submits a request to the liquidity pool for the available liquidity required to settle the trade. After the liquidity is provided to the order book, the trade can be settled.
AMMs Explained
An AMM is a type of DEX that also uses liquidity pools to settle orders. The striking difference is that AMMs access the liquidity pool directly to settle trades, which enables faster order fulfillment and execution. A decentralized AMM like YetiSwap functions by automating trades to algorithmically match buy and sell orders.
In an AMM, asset prices are set through the liquidity pool, which analyzes the supply and demand of orders to execute them automatically after a buyer and seller are matched. The process for matching buyers and sellers is also more fluid within an AMM over a regular DEX, because the matching is automated through smart contract deployment, meaning that records of previous orders don’t need to be manually sifted through.
Say an investor wants to purchase 1 ETH, they submit this buy order to the AMM, which pulls liquidity directly from the pool to settle the trade. Because the pool consistently monitors the supply and demand of all submitted orders, the buyer is already matched with a seller, and the trade can be executed permissionlessly and automatically.
TLDR; an AMM is a DEX that automates trades and has algorithmically set prices.
$YTS Token Performance & Tokenomics
Taking a closer look at the token performance for YetiSwap, it is revealed that this AMM DEX doesn't receive a lot of traffic or activity anymore, giving the impression that it is a dead project. This is backed up by around 18 months without any social media activity. While the website and app are still live, liquidity is low, and activity is even lower.
With a maximum supply (the total number of tokens that can ever enter into circulation) of 556 million YTS, and a self-reported circulating supply of 186.74 million YTS, there are many more token unlocks scheduled for YTS that could further dilute its price, which is down 99.52%. Being down almost 100% means that this token has almost completely lost all value.
YTS has a current market capitalization (the value of all units in an asset’s circulating supply multiplied by the price of one unit) of $56,000 and a 24-hour trade volume of $250. These figures are both down significantly from their highest points in 2022.
These DeFi Llama snapshots show how much YetiSwap has declined in terms of investor usage and adoption. To drop from a market cap of over $4 million to just over $50,000 in 2 years represents an astonishing decline. Furthermore, to drop from a $195,000 24-hour trade volume to a $250.00 24-hour trade volume just 2 years later represents a 99.87% decline in activity.
The current price of YTS is sitting at $0.0003, which makes participating in YetiSwap governance cheap, but not profit-yielding, as the current price is immeasurably lower than its all-time-high price of $0.26, which it hit three years ago. Right now, the coin is at an all-time low.
YetiSwap TVL
To understand any exchange’s success over time, regardless of whether it is a centralized exchange (CEX), decentralized exchange (DEX), or hybrid exchange (HEX), one must analyze capital inflows to the exchange in the form of its Total Value Locked (TVL). TVL is usually a good indicator of protocol adoption, as it is a metric used in decentralized finance (DeFi) to gauge a platform’s level of user activity.
TVL represents the total value of assets deposited, staked, and engaged with smart contracts within a blockchain protocol or application. Smart contracts manage lending, borrowing, and trading while calculating TVL involves aggregating all the value deposited and locked in a protocol’s smart contracts.
The above image shows YetiSwap TVL over time and it displays that the highest TVL ever recorded for the AMM DEX was nearly $3 million in 2021. Since then, the TVL has slowly declined to a point of complete stagnation.
According to DeFi Llama, the current TVL for YetiSwap is only $78,000. Now, out of 336 subnets and DApps that operate on Avalanche, only 264 have recorded TVL and were used and secured capital. Of those 264, YetiSwap is ranked 95th for TVL.
YTS Distribution and Vesting
YTS is fully community-distributed, meaning that most of the token supply’ allocation is given to the community through airdrops.
90% of the total YTS token supply, equivalent to 500 million YTS tokens, has been allocated to the community treasury for liquidity mining and provision. Additionally, 5% of the supply has been allocated to a community airdrop, while the remaining 5% is reserved for developer fees.
Regarding the community treasury allocation, the vesting schedule follows an algorithmic pattern. It starts with 250 million tokens over four years, after which the distributed tokens halve every subsequent four years.
As this pattern persists, each subsequent four-year period will contribute only about a quarter of the tokens distributed in the previous four years. Essentially, it's a gradual reduction in the rate of token distribution over time. From 250 million in the first 4 years to 125 million in the next 4, and then 62.5 million after that, and so forth until every YTS token has been distributed. To ensure that this inflation rate remains gradual, half of the YTS tokens collected from NFT royalty fees will be regularly burned.
YetiSwap NFT Support
YetiSwap features an NFT marketplace where users can buy and sell whitelisted and verified NFT collectibles. Additionally, users can create and list their own NFT projects and collections within the marketplace. This marketplace enables creator monetization as users who mint and list their own NFT collections can generate royalties with every sale. Creators of NFTs can set custom royalty rates between 0% and 15%.
Currently, all transactions in the YetiSwap NFT marketplace are conducted exclusively in $YTS or $AVAX. Transaction fees are applied to transactions in the form of commissions that are paid out to the creators of whichever NFTs are being purchased, sold, or exchanged. A 2% commission fee is charged for all transactions conducted in $YTS, while a 3% commission fee is charged for all transactions conducted in $AVAX.
The NFT marketplace looks to have been massively overlooked, and if the website is accurate, it appears that only 3 NFTs were ever sold.
Final Thoughts on YetiSwap
YetiSwap was a well-intentioned AMM-DEX built on Avalanche. Operating as a community-governed protocol, YetiSwap sought to facilitate quick and cost-effective trades while ensuring a fair and transparent token distribution model. Unfortunately, with an inactive platform, very low TVL, a dead token, zero social media activity, and no visible interest in the project, it appears that YetiSwap is finished.
Despite being community-distributed and offering various incentives, such as NFT support and royalties, YetiSwap failed to genuinely compete in a tricky DeFi market.
