Orbit

Orbit

Atomic decentralized exchange protocol for everyone

Orbit is a part of the Kleonia ecosystem, our goal is to innovate a decentralized financial system that is more fair and efficient. By bringing together visionaries, knowledge, and recent technologies, we will be able to create a fair and sustainable ecosystem that will provide financial freedom for everyone.

Inspiration

We are building this to improve the current decentralized exchange model so that it's more user-friendly and robust. DEX is one of the most important and the largest sectors in the DeFi space and is essential for every smart contract compatible blockchain. The atomic orbital is analogous to Orbit in that it is a mathematical function describing the location and wave-like behavior of an electron in an atom. This function can be used to calculate the probability of finding any electron of an atom in any specific region around the atom's Nucleus. We got the product logos from Atomic orbitals of electron in Hydrogen atom at energy levels (4,2,2)

The following are problems that can be solved with our product.

Capital Efficiency: In a constant function market maker dex, the amount of capital being traded is a small fraction of the total asset deposit, and the slippage is quite high.

Liquidity Fragmentation: Many assets do not have the liquidity to be traded in certain pairs due to the lack of available liquidity (Liquidity is separated between each pool). This means that users who want to trade exotic pairs often have to do multiple swaps to get the tokens they want, which costs more gas.

Impermanent loss: It is doubtful for users to keep track of every LP position and monitor the impermanent losses. A study found that actively managing the position of LP did not reduce impermanent losses for users. Furthermore, one study from Topaze Blue found that 80% of the liquidity pool in Uniswap V3 lost more to impermanent losses than gained from trading fees. People also lose money in constant function market maker DEXes in a bull market, when the token price goes up and users are providing liquidity, the gain is simply less than holding the token.

Complication for the average user: The Uniswap V3 model is complicated and many users lose money because of it. 50% of liquidity providers have negative returns compared to simply holding the asset. Users are required to choose the price range and weigh the APY and risk of providing liquidity in each pool before choosing which pool to provide liquidity, which is a hard decision for average users. They may get drawn into the pool that gives the most APY, which makes liquidity for each pair separated. Liquidity providing must be more simple and lucrative for mass adoption. Users should be able to deposit their token and don’t have to worry about it, like when they depositing their money into a bank. These tokens would then continuously go up in value. Many new users to the AMM model see the opportunity of high APY without realizing the undercover or hidden risks of getting impermanent loss or knowing how to manage their risk properly, resulting in a huge loss of capital.

What do we do?

We want to build a simple decentralized exchange (dex) for the average retail users that is so simple that they do not need to know about IL or knowing which pairs of tokens to choose, but still will be able to provide liquidity and earn yield.

Nukleus

The Nukleus is a virtual token that is used to determine the ratio of every trading pair on the Orbit platform. This allows users to trade token A for token B without the need for token A and B to be paired together. Price discovery for each token pair is determined by the ratio of Nukleus tokens. Nukleus tokens are pegged 1:1 to HBAR and cannot be traded on secondary markets. There will be no price fluctuation because the token is not tradable. They are always minted and burned within the smart contract. Each token will have a different corresponding amount with Nukleus.

Orbital

Orbital is a liquidity pool for Orbit that allows users to deposit a single token and earn fees from every trading pair of their deposited token. Trading fees are separate to liquidity providers and the protocol, and users will receive impermanent loss protection from the protocol accruing treasury up to 100%. Only tokens that do not have severely volatile will be listed on the Orbital first, and fee rewards will be automatically compound into the LP position. Orbit is an omni pool that does not have any restrictions on the proportions of tokens in the liquidity pool, so it's more flexible than other pools when it comes to the proportions of tokens in each pool. For example, a token in Orbit could have 50%, 22%, 15%, and 13% of four different tokens with different values and proportion without limitation, while a pool on Balancer or Curve 3Pool would need to have each tokens proportion equal, for example, exactly 33.33% of three different tokens in the pool.

Orbiter

In the Orbit protocol, liquidity is provided through a pool by minting Nukleus for token pairing, rather than a traditional single-sided liquidity pool, for example, Curve will automatically swap half of the deposited token to their pool pair token and pair the remaining half deposited for liquidity. Unlike Orbit, users can deposit any token and receive the same token back with yield when they withdraw. There is no need to swap any tokens, and price discovery happens through the ratio of Nukleus between each token with no force exposure with a pair token to earn yield.

Fair game

We want to make the risk from protocol and users as equal as possible. Some part of the treasury will be adjusted to compensate for the impermanent loss. Many large protocols do not even concern themselves with protecting liquidity providers. We are here with different approaches that are practical, while we also desire to work under an ethical framework. Some part of the POL will be used to protect users from permanent loss. Other than developing the product, we will put tremendous effort to encourage a collaboration between other protocols and communities to set up the appropriate portion of the protocol's treasury that will be used as a reserve to compensate for impermanent loss in Orbiter. We will also explore automated hedges, squeeth strategies with Hedara, lending positions for hedging, and impermanent loss insurance products funding to make liquidity providing a safe choice for everyone.

Challenge we run into

Developing new product architecture is a difficult task, but we manage to do so by adhering to the principle that we want to make DeFi easy to use and accessible to everyone. We carefully analyze the pain points in the DEX ecosystem and develop product ideas from that. We went through many product versions until we found the most suitable. We had to get rid of our old idea that we had been working on for almost a month because of liquidity problems, but finally we are satisfied with the current results.

What we have learned

The Uniswap V3 concentrated liquidity did not work perfectly for liquidity providers and another decentralized exchange architecture is needed to solve this problem. The constant function market maker does not work in the favor of the liquidity provider. Some have provided solutions like Curve stablecoin invariant and Bancor impermanent loss protection but Decentralized exchange protocol still lacks innovators to tackle this problem.

Next step for Orbit

Our next steps are to simulate the protocol in multiple market conditions, publish the lightpaper, develop a MVP, and also create a website with platform details. We would also love to have contact with an investor and participate in an accelerator program. We truly believe that this new decentralized exchange architecture is the answer that makes DeFi easy to use for the average user with full accessibility. They do not have to worry about impermanent loss or choosing a liquidity pool anymore. They can receive yield from every trading pair and receive protection from IL. We want to set a new standard for projects on Hedera. This standard will be something that people can rely on. We believe that this standard is especially important in finance, and that it should be pushed as much as possible in our current capitalist world. Many businesses in the DeFi space are exploiting people, and we want to set a new, higher standard in this industry for businesses to be more ethical and also to prevent unethical practices.