Version 1.2 (June 15, 2021)
O3 Swap is a proprietary cross-chain aggregation protocol built by O3 Labs. The mission of O3 Swap is to provide consumers access to cryptocurrency-based, financial services, allowing them to exchange, or ‘swap’, various digital assets within their O3 Wallet. The benefits of this design can be attributed to the high level of safety and security that is inherent to the decentralized model of asset storage and protection. The platform also provides ‘cross-chain’ swaps to conduct exchange settlements without regard to the limitations of a typical isolated Blockchain network. The term ‘cross-chain’ derives itself from the fact that the exchange is executed after traveling across two or more separate blockchain networks. With a cross-chain swap, the initial asset and the target asset are deployed on two isolated Blockchains that otherwise are non-communicative. In light of the advanced development of decentralized financial protocols (DeFi) and the increasingly mature markets for lending, exchange, derivatives, etc., The O3 Swap protocol, in cooperation with its associated decentralized wallet software, provides a one-stop aggregation & exchange platform for consumers and offers developers access to an open, distributed, limitless, and secure — trading environment.
O3 Labs was established in Tokyo in 2017. We have worked tirelessly to contribute our efforts towards the advancement of the specialized development field of crypto-wallet. Our early development has led some industry experts to refer to the O3 Team as ‘pioneers’ of wallet technology. Since our launch, we have continued to learn and grow as an organization and our once small team has grown into a far-reaching and diverse group; at present we have Team members from nearly every continent. O3 Labs is committed to providing professional digital asset management tools and services for 100,000 users in over 40 countries worldwide, with an O3 community of over 20,000 people in Japan, Europe, USA, Russia, Korea and China.
DeFi innovation has brought many practical applications to the industry and has promoted the development of open finance. The decentralized exchange (DEX) is a notable example that has gradually been recognized by the market following a surge of growth and consumer participation. The Ethereum DeFi projects’ total value of locked assets is over 60 billion USD (DeBank data). However, network congestion and poor scalability have caused unprecedentedly high network transaction fees. This problem is urgent and caused significant financial detriment for many. The problem lacks a proven solution with community consensus. With the emergence of various Layer2 solutions as well as the efforts of some sidechains such as BSC and HECO, there are now alternative choices for retail investors. However, transaction barriers between blockchains will continue to limit the usage of assets and O3 Swap helps counter these limitations.
In order to provide a more efficient and simple trading method, we compare different exchanges on the leading chains to find the most cost-effective rates for our users. Moreover, we implement a cross-chain protocol to connect different blockchain networks and allow users to freely exchange assets without regard to network isolation.
- 1.Permissionless, Anti-censorship: In any environment, anyone can access O3 Swap without permission and KYC review.
- 2.Liquidity Aggregation: Users can exchange assets at the lowest rate and via the most efficient trading route — this is achieved by connecting their own decentralized wallets.
- 3.Cross-chain Exchange: We implement all proven and possible cross-chain solutions onto the market with our aggregation protocol. With this, we can achieve cross-chain transactions. Users are able to freely exchange multi-chain assets with one-click.
- 4.Community Drive: Based on the O3 Swap Token's issuance and economic model, decentralized governance and community-driven development will be realized.
O3 Swap uses a four-layer structure to ensure the integrity and symmetry of the information in the liquid market. As a result, the consumer has a safe and efficient trading environment.
- 1.Network Layer: As the basis of the O3 Swap cross-chain protocol, we will aggregate high-quality public chains and ecological chain systems in the market. This includes Ethereum, Binance Smart Chain, Neo, Huobi ECO Chain, and creditworthy layer 2 projects, to provide cross-chain trading.
- 2.Market Liquidity: The aggregation of different liquidity sources through O3 Swap, allows the platform to identify and recommend the best exchange quote for users.
- 3.Settlement Layer: Based on the private key signature authorization, the transaction settlement is completed through the smart contract. Additionally, cross-chain protocols and cross-chain pools will help users complete cross-chain asset exchanges and settlements.
- 4.Application Layer: Provide developers with a complete service API to integrate into different applications, and providing users with a convenient and user-friendly operating platform.
The main functional modules of O3 Swap include the exchange aggregators (O3 Aggregator) and cross-chain pool (O3 Hub). O3 Aggregators are deployed on mainstream blockchains and help users find the most effective trading rates and routes in the corresponding network. O3 Hub provides users with cross-chain transaction services based on PolyNetwork and supports users to add liquidity by a single token from different chains to earn income from cross-chain transaction fees and O3 rewards.
System roles are divided into the following categories:
- 1.Users: Users connect to O3 Swap for transacting with their crypto wallet.
- 2.O3 Relayer: The agent of the user and the contract on the chain. Depending on the different users’ needs, O3 relayer can find the best exchange rate through O3 Swap.
- 3.Swap: As the core exchange mechanism of the system, it receives users’ requests from the relayer and achieves liquidity settlement by smart contracts.
- 4.Aggregator: Aggregate liquidity sources across blockchains and determine the best trading rates and routes for users.
- 5.Cross-chain Pool: The cross-chain asset transaction pool built based on the PolyNetwork protocol realizes the free exchange of assets across chains.
- 6.Liquidity Providers: Mainly including the following liquidity sources:
- Automated market makers of on-chain algorithms from different DEXs.
- Lp market maker who provides liquidity for Cross-chain Pool.
O3 Hub is composed of a cross-chain asset pool such as stablecoin pool and cross-chain protocol based on Poly Network. With the StableSwap invariant from Curve, the performance of the algorithm was evaluated and optimized assuming providing liquidity for stablecoin. This sort of automated liquidity provider for stablecoin offers very low price slippage and extremely reduces the impermanent loss. On the implementation side, traders can exchange mainstream assets across blockchains simply; Liquidity providers can deposit single or multiple assets to the cross-chain pool and stake the LP shares to earn O3 rewards. The advantage of this design is allowing users to exchange cross-chain assets without asset deposit and withdrawal compared to the traditional Hub mechanism, which greatly reduces the threshold for user operations/transactions.
For example, in the centralized route, the trading route of BNB on Metamask to HUSD on MDEX is a complicated and cumbersome process. Traders need to deposit the coin to the centralized exchange and execute the transaction twice with KYC & 2-step verification, finally withdraw it to the decentralized wallet and DEX. In O3 decentralized route, we provide the one-step trading experience via our aggregators and cross-chain pool, allowing traders to simply exchange multi-chain assets within their wallet. Whole process is no account limit and permissionless.
O3 Swap Token (O3) is an application token issued by O3 Swap. It is an important mediator to promote the development of the O3 Swap network. Based on the economic model of O3 Swap, all participants and developers are encouraged to invest in the maintenance of the overall ecological network through the community governance of tokens.
In the economic model of O3 Swap, there are three ways to earn O3. Firstly, users can receive airdrops through early participation in product testing and community contributions. Secondly, they can receive trade mining rewards by using O3 Swap. Thirdly, they can provide liquidity to Hub (cross-chain pool) to obtain O3 rewards. O3 is in a locked state when obtained in the above three ways. Users are required to provide liquidity with O3 trading pairs to main DEXs to unlock the O3 in the account. There are three primary benefits for the unlocked O3:
- 1.Member rights: Stake O3 to obtain interest and transaction discounts allocated by the O3 Swap treasury.
- 2.Community governance: Users can participate in community governance by staking O3 to initiate proposals, participate in voting, etc.
- 3.LP staking: Users can use O3 to synthesize liquidity equity proof (LP), which can be used for unlocking and mining.
On the other hand, all transaction fees from O3 Swap will regularly be used to buyback O3 in open markets, and distributed to O3 stakers and development committees in proportion.
- 1.Users: Consumers who use O3 Swap for trading.
- 2.O3 Holders: Community members who hold O3 to participate in community governance and stake O3 to obtain related rights and interests.
- 3.Liquidity Providers: The partners/users who provide liquidity to the O3 Hub (cross-chain pool).
- 4.Treasury: Responsible for receiving, managing, distributing token, and publishing financial data to the community on a regular basis.
- 5.Development Committee: In the early stage, it is composed of O3 Labs, community contributors, and representatives who obtained a majority of votes. In the later stage, the committee will be elected by the community.
All revenue from the O3 Swap platform will be used to buy back O3 on public exchanges and be deposited in O3 Swap Treasury for redistribution.
O3 holders will be able to participate in community governance, trading discounts and other member rights by staking O3. According to the amount of staking, the staker can get a certain percentage of the staking reward, which comes from O3 Swap Treasury. The following formula is used to issue:
The initial proportion defaults to 70%, which means that for every token that is repurchased or bought back, 0.7 of O3 will be distributed to the O3 Staker. The distribution percentage is determined by DAO proposal voting in late period.
Users will receive O3 as a reward after trading on O3 Swap. According to the amount of O3 purchased each time, O3 will be distributed for trade mining rewards according to the initial default 1:1. The time of rewards settled and distributed depends on the block time period. The formula for trade mining is as follows:
The initial ratio defaults to 100%, meaning that when buyback every O3, the system releases one O3 for trade mining. The distribution percentage is determined by DAO proposal voting in the late period.
Users can generate Lp tokens to add liquidity into O3 cross-chain pool via staking single or multiple tokens. LP tokens represent liquidity providers' right to redeem their assets and earn O3 rewards from trading fees, proportional to their contributions to the cross-chain pool. 100% of the trading fees in cross-chain pool (O3 Hub) will be distributed to liquidity providers, which means the amount of the underlying token that can be redeemed by each LP token increases. LP tokens will be burned when liquidity providers withdraw their liquidity, and they can get back their deposited token pairs.
Users can obtain locked O3 (which is not yet able to participate in the full function of O3 Swap) through the initial platform airdrop, trade mining, and yield farming.
By providing liquidity with O3 trading pairs to main DEXs, users can participate in the full function of the O3 Swap (refer to economic model). Unlock step and formula as follows:
- STEP1: Search O3/USDT trading pair on Uniswap V2. Add liquidity to get UNI-LP tokens.
- STEP2: Go to the "Vault" and stake UNI-LP. The locked O3 will begin to convert to unlocked O3. The maximum unlock speed is 15000 Ethereum blocks.
- STEP1: Search O3/BUSD trading pair on PancakeSwap V2. Add liquidity to get CAKE-LP tokens.
- STEP2: Go to "Vault" and switch to the BSC Mainnet.
- STEP3: Stake CAKE-LP to unlock the O3 (BEP-20). The locked O3 will begin to convert to unlocked O3. The maximum unlock speed is 66000 BSC blocks.
Treasury is O3's revenue reserve pool and is responsible for receiving, managing, distributing, and regularly publishing financial data to the community. The income of O3 Swap will be used to buyback O3 in the open market within a regular block period and deposit in the treasury. In order to promote the development of O3 Swap, during the first stage of governance period (2021 Q1-Q2), 70% of the Treasury’s revenue is allocated to O3 stakers to incentivize community contributions; 30% is allocated to the Development Committee.
The Development Committee is mainly responsible for promoting the development of the project and the community construction. During the early stages, it will be composed of O3 Labs, community contributors, and representatives who have obtained the majority of votes. In the later stages, it will be completely elected by the community.
The total issuance limit of O3 is 100,000,000 pieces, which is divided into two distribution phases, the total amount of phase 0 is 10,000,000 pieces which includes the Genesis Incentive and the Community Feedback below; the total amount of phase 1 is 90,000,000 pieces.
Only on Ethereum Mainnet.
- Cross-chain pool liquidity mining
- 1.Deposit USDT/BUSD/HUSD to the Hub (cross-chain stablecoin pool) to get USD-LP.
- 2.Go to "Vault". Stake USD-LP to get O3 reward (unlock required).
- O3 mining
- 1.Go to "Vault". Stake O3 to get O3 reward (unlock required).
- 2.Staked O3 is not available to unstake until next mining period (Jurassic).
- 1.Support Ethereum, Binance Smart Chain, Neo, and Huobi ECO Chain.
- 2.Support trade mining.
- 3.Stake O3 to gain transaction discount.
- 4.Launch Buyback mechanism.
This prefatory paper is for general information based on O3 Swap’s development proposal and experience. It should not be considered as professional financial investment advice and used in the evaluation of making any investment decision. This paper reflects the current opinions of the authors and is not made on behalf of Paradigm or its affiliates. New updates and changes will not be announced. Please follow the official website for the latest product updates.