Analysis of Clipper: A DEX Project Focusing on the Small Transaction Market

整理：布兰

Currently, most cryptocurrency exchanges are pursuing high liquidity to allow traders to execute large trades with lower slippage, but this requires retail investors to pay higher trading fees to incentivize such a large amount of liquidity, while they cannot enjoy the benefits of reduced slippage.

In this scenario, more liquidity can further harm retail investors. Therefore, for small trades, lower trading fees outweigh slightly higher slippage when it comes to finding the best trading price.

Clipper is a new decentralized exchange designed specifically for retail investors, aimed at providing traders with the best prices for small trades (around $10,000). Since its launch, the project has received support from Polychain Capital, 0x Labs, 1inch, DeFi Alliance, Robert Leshner, Naval Ravikant, and others.

Clipper currently supports trading between stablecoins (DAI, USDC, USDT) and wBTC or ETH, specifically optimizing the trade-off between trading fees and slippage in the following ways:

First, the liquidity pool cap is set at $20 million. Due to the smaller liquidity pool, the protocol must pay less to incentivize liquidity providers, ultimately keeping trading fees for everyday traders at a low level (20 basis points or less).

Second, it uses a unique AMM variant to minimize slippage. Clipper's AMM variant mathematically incurs less slippage than constant product market makers, which are the default AMM model used by most DEXs. Additionally, Clipper maintains a single merged liquidity pool for an arbitrary number of asset pairs instead of maintaining a liquidity pool for each asset pair, which improves capital efficiency and reduces slippage relative to pool size.

Third, it runs efficient on-chain computations to reduce gas fees. The protocol optimizes using a novel closed-form invariant that is simple to compute on-chain, thus requiring less gas. Trading with Clipper requires about 100k units of gas, comparable to most leading DEXs today.

Fourth, it updates asset prices through external oracles. When the price of LP tokens changes relative to their deposits in the liquidity pool, impermanent loss occurs. Impermanent loss also harms everyday traders, as they often have to pay higher trading fees to offset losses and attract sufficient liquidity. To mitigate this, Clipper updates the asset prices in its liquidity pool by considering external market prices from oracles, rather than relying solely on arbitrageurs to correct prices.

It is understood that the Clipper project was initiated by Shipyard Software, a team that has built a suite of DEXs for various types of crypto investors and specific use cases. The Shipyard team has extensive experience in academic research on online markets, NFTs, and automated market making.

The protocol is managed by a decentralized autonomous organization (DAO), which currently consists of a multi-signature wallet including Shipyard, Polychain, and other community members as signers. As the project matures, Clipper intends to enable community governance through a native token.

Clipper is still in the testing phase, with a liquidity pool of $17 million, and has integrated with the DEX aggregator 1inch Network. In the future, Clipper plans to expand its pool of liquidity providers to open up to the community, launch governance tokens, integrate with other DEX aggregators, and expand to other chains such as Polygon and Layer 2 protocols.

In summary, Clipper's positioning is to provide the best trading prices for retail investors, helping them to more easily enter the crypto ecosystem.

Reference: https://www.veradiverdict.com/p/dex-for-the-people