Frequently Asked Questions
SecretSwap is a protocol for creating liquidity and trading SNIP-20 tokens on Secret Network. Leveraging secret contracts, SecretSwap protects users against malicious front-running and privacy threats, provides access to cross-chain liquidity, and reduces fees relative to Ethereum.
Front-running is an arbitrage strategy to make profit at someone else’s expense based on an information advantage. Front-running issue is not limited to DeFi, however the scale of the problem is amplified given the public nature of blockchains. Miners and arbitrage bots can see an order on the mempool before the order makes its way into the ledger and insert their orders with higher gas fees to be processed first. This means that the miner or the arbitrage bot can profit at the expense of a regular user. Furthermore, this arbitrage opportunity increases the gas fees of the underlying network, hurting users even more. Front-running problem on Ethereum DeFi costs users ~$1bn per year and millions of dollars in lost gas fees.
SecretSwap is a protocol to swap secret contract based tokens (SNIP-20s) on Secret Network. Given the encrypted nature of secret contracts, inputs to a transaction/contract are encrypted while they are on the mempool and cannot be frontrun by any adversary. This ensures SecretSwap protects its users and their money from front-running attacks.
First, you’ll need a Keplr wallet and some SCRT. Once completed, head over to SecretSwap to start using the protocol to provide liquidity or swap tokens. Since SecretSwap is built on Secret Network, each transaction and interaction costs SCRT (the native coin of the network). This is called the “gas fee” and it’s paid to network validators to keep the network running.
SecretSwap is an automated market maker (AMM) liquidity protocol. There is no orderbook, no centralized party, and no central facilitator of trade. Using Secret Contracts, the mempool of potential SecretSwap transactions are kept entirely encrypted - protecting users from front-running attacks and providing an increased level of privacy compared to traditional AMMs.
Each pool within SecretSwap is defined by a secret contract that includes a few functions to enable swapping tokens, adding liquidity and more. At its core each pool uses the function
x*y=kto maintain a curve along which trades can happen.
The pools keep track of reserves (liquidity) and updates those reserves every single time someone trades. Because the reserves are automatically rebalanced, a SecretSwap pool can always be used to buy or sell a token without requiring a counterparty on the other side of your trade.
Note: Given the requirement to publicly update pool reserves to determine the price, an observer can see a consolidated view of changes (swaps, provide / remove liquidity) in a given block. As a result, if there’s a single transaction with the pool in a given block, it is not possible to have privacy on that transaction. With more transactions per pool in a given block, SecretSwap provides additional privacy to users.
For a more in depth description, check out how SecretSwap works in this blog post outlining the theory behind an AMM using secret contracts.
Prices are determined by the amount of each secret token in a pool. The secret contract maintains a constant using the following function:
In this case
k= constant. For each trade, a certain amount of secret tokens are removed from the pool in exchange for adding an amount of the other secret token. To maintain k, the balances held by the secret contract are adjusted during the execution of the trade, therefore changing the price.
There are 2 fees involved with a SecretSwap transaction: SecretSwap fees and Secret Network fees. SecretSwap fees are 0.3% of each swap deducted across the pairs. The fees are put back in the liquidity pool providing income for LPs of that pair. The fees can be changed in the future with decentralized governance enabled by SEFI.
Secret Network requires SCRT as gas to execute each transaction. Depending on the market price of SCRT, transaction costs can increase or decrease.
Secret Network requires SCRT as gas to execute each transaction. Depending on the market price of SCRT transaction costs can increase or decrease
SEFI is the governance token for SecretSwap and the Secret DeFi ecosystem. Users of SecretSwap can earn SEFI to participate in shaping the future of the first front-running resistant, privacy-first open financial system. SEFI is a SNIP-20 or Secret Token, which means all SEFI transactions and contract interactions are private.
Total supply of SEFI is set at 1,000,000,000. This amount is a non-inflationary fixed supply set at launch. 10% of the SEFI supply will be distributed at the genesis event to SecretSwap LPs during the soft-launch, SCRT stakers who secure Secret Network, users (depositors) of Secret Network-Ethereum bridge and UNI holders (above 400 UNI). The remaining 90% of the supply will be distributed over 4 years with a deflationary schedule. For more, see SEFI tokenomics.
Users will be able to claim SEFI both on Secret Network with their Keplr Wallet and on Ethereum with their Metamask wallet. Users can claim their SEFI airdrop on the SecretSwap application. After you’ve claimed your SEFI, you can provide liquidity to sSCRT/SEFI pool or stake your SEFI and continue to earn SEFI after genesis.
SecretSwap LPs and SEFI stakers will begin earning SEFI after genesis. Traders on SecretSwap will also earn SEFI, though not immediately at genesis. Currently eligible pools for LP rewards are:
- sETH - sWBTC
- sSCRT - SEFI
- sSCRT - sETH
- sSCRT - sLINK
- sSCRT - sRSR
- sSCRT - sRUNE
- sSCRT - sUSDT
- sSCRT - sWBTC
Yes, you can use this link to stake SEFI and participate in SecretSwap governance. Staking SEFI provides impermanent loss free yield. SEFI staking is done through a secret contract, using the SecretSwap application.
LP tokens are crypto-assets (secretTokens)mathematical proof that represents your ownership of a pool. When Alice provides provided assets to a pool, she receives LP tokens. Hand holding LP tokens means holding the claim to getting those assets back. This is in contrast to SEFI, which is the SecretSwap governance token used for managing application layer changes. Staking LP tokens allows you to earn SEFI.
All SecretSwap rewards and governance are based on SEFI.
SEFI is used as an application layer governance token specifically for SecretSwap parameters, developer fund spending, and application related changes. This is in contrast to SCRT, which is the native governance token of the Secret Network protocol layer.
The price of SEFI will be determined by market forces of demand and supply.
SecretSwap token pair secret contracts are ownerless. We have no special control over the pair secret contracts’ functionality; because of this, any tokens accidentally transferred to the token contract itself are lost forever. Please be careful!
You can use the official SecretSwap Discord Server or the SecretSwap official Telegram chat to get support for all SecretSwap related issues.
SEFI is a SNIP-20 (secret token) and supported by Keplr like all other SNIP-20s.