Introducing TONCO: The First DEX with Concentrated Liquidity on TON

Trade Limitations on TON

Decentralized exchanges (DEXs) on TON have adopted some of the same principles that revolutionized DeFi on Ethereum, particularly the Automated Market Maker (AMM) v2 model. While this model, first popularized by Uniswap, was groundbreaking in its time, allowing users to trade tokens without needing an order book or centralized authority, it now shows its age.

The XYK model (x * y = k), which balances liquidity pools by ensuring the value of one token remains equal to the other regardless of price, worked well for early DeFi. It was a simple, effective system that helped bootstrap liquidity in the early days of decentralized finance. But today, this model struggles to keep up with evolving needs in liquidity provision and trading efficiency.

On TON Blockchain, the issue is even more pronounced. While TON’s innovations allow for a higher volume of transactions and more advanced smart contract functionality, current AMM models fall short of unlocking the full potential of this network. These models suffer from inefficient capital usage, higher slippage, and lower yields for liquidity providers, all of which hinder the growth of DeFi on TON.

To truly harness the power of TON, the outdated AMM v2 model needs to evolve. What worked in the past is no longer enough to meet the demands of today’s liquidity providers and traders.

TONCO’s Solution: The New Liquidity Pooling Approach

This is where V3 technology comes into play with the introduction of Concentrated Liquidity, and TONCO is at the forefront of bringing this innovation to TON Blockchain. But TONCO isn’t just copying existing solutions from other networks—it's enhancing and adapting them specifically for the unique needs of DeFi on TON. So, what exactly is Concentrated Liquidity?

Unlike the traditional XYK model, TONCO allows liquidity providers (LPs) to allocate liquidity within specific price ranges—a concept known as concentrated liquidity position. This approach enables LPs to open multiple positions within a single pool, each customized to their desired price ranges and risk preferences. The result is deeper, more efficient liquidity.

LPs can choose from a list of preset price ranges or manually define their own by selecting minimum and maximum price points.

When the market price falls within an LP’s selected range, their liquidity is used for trades, earning them a share of the trading fees relative to their contribution within that range. As prices fluctuate, different LPs’ liquidity is utilized, optimizing capital usage and ensuring liquidity is concentrated where it’s needed most.

The Key Benefits of Concentrated Liquidity

TONCO’s Concentrated Liquidity model brings a range of powerful benefits to both liquidity providers (LPs) and traders:

Higher Capital Efficiency

LPs can focus their funds within specific price ranges, allowing them to maximize their fee earnings by concentrating liquidity where it's most needed.

Reduced Slippage

Traders enjoy deeper liquidity in active price ranges, leading to significantly reduced slippage and more accurate trade execution.

Flexible Risk Management

LPs have the ability to adjust their positions to minimize or even avoid impermanent loss, offering more control over risk.

Customizable Price Ranges

LPs can choose price intervals where they anticipate the most trading activity, enabling them to optimize returns by targeting high-demand zones.

Increased Fee Revenue

Concentrating liquidity in selected price bands can lead to higher trading volume in those areas, generating more frequent and substantial fees.

For users who have faced high impermanent loss on platforms like Uniswap V3 or V2, TONCO’s concentrated liquidity model provides a smarter solution. This approach enhances capital efficiency by up to 95% compared to traditional v2 AMMs, empowering LPs to minimize risk while maximizing returns.

Advanced Features for a Smarter DEX

Dynamic Fees: Adapting to Market Conditions

TONCO’s dynamic fee structure sets it apart from traditional AMMs. Unlike Uniswap V3, which offers fixed fees across different pools, TONCO employs a volatility-based fee model that adjusts according to market conditions, such as volatility and pool volume.

This means that, on TONCO, LPs don’t have to choose between multiple pools with varying fee structures. Instead, they benefit from a single pool where fees dynamically adjust, simplifying the process and enhancing profitability.

Streamlined Farming with TONCO

TONCO simplifies the farming process by integrating it directly into the platform. Unlike Uniswap, where users must interact with external smart contracts to farm tokens, TONCO offers an all-in-one solution. Users can easily stake their extra tokens in liquidity pools and earn rewards seamlessly within the platform.

This streamlined approach makes yield farming easier and more efficient, enabling users to boost their returns without the hassle of navigating multiple platforms.

Modular Approach: The Future of V4 AMM

TONCO is designed with the future in mind, preparing to integrate limit orders, trading discounts, and KYC—all through V4 plugins.

The upcoming V4 AMM is built on a modular architecture, transforming how DEXes operate. This approach splits the previously monolithic infrastructure into two key components: the Core Codebase and Plugins. These plugins will significantly improve the efficiency, security, and adaptability of DEXes, positioning TONCO as a strong competitor to Uniswap V4.

TON’s architecture is distinct from traditional EVM chains, offering greater flexibility for creating plugins. By keeping plugin execution offchain, security is enhanced, while the modular design allows for a reimagined AMM approach that prioritizes efficiency and scalability.

DeFi Revolution on TON

TONCO is leading the charge in transforming DeFi on TON Blockchain, pushing the boundaries of what decentralized exchanges can achieve. By making liquidity more efficient and trades more profitable, TONCO is setting a new standard for DEXs on TON.

We’re gearing up for our launch in Q4 2024, starting with our Testnet release. Want to be among the first to experience a new way to trade on TON? Join our waitlist on the website and be ready for the launch. We have lots of incentives planned for early adopters.