TL;DR
WOOFi is an all-in-one decentralized application (DApp) built by WOO Network. The main goal of WOOFi is to enhance users’ experience with decentralized finance (DeFi) by providing reduced slippage, competitive swap fees, and other useful features.
WOOFi users can swap popular digital assets and access income-earning opportunities like staking and providing liquidity to the network. One of the platform’s main value propositions for DeFi users is deep liquidity.
Introduction
Since 2020, decentralized exchanges (DEXes) have experienced rapid growth. In August 2022 alone, the monthly DEX total trading volume exceeded $66 billion. To meet the ever-growing demand for low-fee on-chain trading, WOO Network launched WOOFi in October 2021 and WOOFi DEX in June 2022. Together, WOOFi and WOOFi DEX offer a suite of tools from those enabling simple swaps all the way to professional trading interfaces.
How does WOOFi work?
WOOFi’s product offerings are designed to help DeFi users access competitive prices, low fees, tight bid-ask spreads, as well as a variety of yield-generating opportunities.
The platform offers three main use cases:
Swapping
By paying a minimal 0.025% fee with WOOFi Swap, users can swap popular, financially-sound, blue-chip assets within or across chains supported by WOOFi.
Earning
Anyone can deposit digital assets to earn competitive APYs through WOOFi’s single-sided staking solution, Supercharger Vaults. Single-sided staking requires users to stake only one type of token. This model incentivizes asset holders to provide liquidity to WOOFi, in turn enabling WOOFi to offer better liquidity to traders.
Staking
Token holders can stake their WOO tokens on the WOOFi platform to earn revenue from WOOFi’s minimal 0.025% swap fee.
WOOFi Swap
Unlike other DApps, WOOFi simulates the deep liquidity from WOO Network’s centralized exchange, WOO X, meaning users can enjoy DeFi services with more affordable, CeFi-grade prices.
Other advantages of using this model include reduced slippage and increased resistance to sandwich attacks. Slippage refers to the difference between the asset’s market price and its actual price upon order execution. It is more likely to get wider when market conditions are volatile or when trading with low-liquidity assets, causing traders to buy or sell their assets for more or less than expected.
WOOFi DEX
Launched in June 2022, WOOFi DEX is WOO Network’s decentralized exchange powered by Orderly Network. The platform was designed to bring high liquidity, advanced trading tools, a customizable user interface (UI), and a transparent order book to NEAR protocol. WOOFi DEX helps connect traders with a platform that offers faster execution and lower fees, in addition to allowing traders to maintain custody of their assets.
WOOFi DEX facilitates spot trading of popular blue-chip assets like BTC, ETH, and NEAR. In the future, the platform is expected to expand its services and implement functionalities like margin trading, perpetual swaps, lending, and even borrowing. Bootstrapped by leading market makers like Kronos Research, AGBuild, and Ledger Prime, WOOFi DEX is positioned to deliver an improved DeFi trading experience that has the look and feel of a centralized exchange.
WOOFi Supercharger vaults
WOOFi enables users to deposit a single token and earn competitive yields while maintaining complete exposure to their favorite assets.
Up to 90% of the assets in the Supercharger vault can be borrowed by WOOFi’s liquidity provider at a fixed rate to provide liquidity to WOOFi. The remaining assets are deployed to third-party DeFi protocols for external yield farming. By hedging on WOO Network’s centralized exchange, WOO X, and therefore remaining market-neutral, WOOFi’s liquidity providers can ensure that there are always sufficient funds for users to withdraw upon request.
This dual strategy enables depositors to directly benefit from two separate sources of revenue while providing liquidity to WOOFi. Users can request to withdraw their deposited assets with no fee or limit (except when the vault is under settlement) once the 7-day settlement cycle is complete. Ten percent of each Supercharger vault’s Total Value Locked (TVL) will be set aside each week for instant withdrawals, though a 0.3% withdrawal fee will be charged to prevent abuse of this system.
What makes WOOFi unique?
sPMM liquidity model
Instead of adopting an automated market maker (AMM) model like most other DEXes, WOOFi leverages an innovative synthetic proactive market making (sPMM) approach to achieve deeper liquidity.
The sPMM model aims to simulate the deep liquidity from WOO Network’s centralized exchange, WOO X, allowing the WOOFi Swap to offer lower slippage and competitive DeFi prices while staying decentralized.
Protection against sandwich attacks
A sandwich attack occurs when a malicious trader places one order before and one after a pending transaction on a DeFi protocol to manipulate asset prices. An exploiter thus pushes an asset price up by placing a bid at a higher price than a victim’s pending bid price. When the victim buys at the higher price, the attacker can sell their asset at the new, artificially inflated price.
Sandwich attacks are common among large traders who swap assets with AMM-based DEXes. Since AMM price discovery is driven by the token balances in the liquidity pool, attackers can take advantage of this transparency to inflate prices.
In contrast, WOOFi’s sPMM price discovery is determined by the parameters of on-chain price feeds instead of pool liquidity. Bad actors will not be able to predict prices based on token balances.
The DEX that pays for order flow
Currently, WOOFi has a broker program in place, where it pays 0.5 basis points (bps) on the volume sent by third-party DApps as a rebate.
What is WOO?
WOO is the native token used by WOOFi and the larger suite of WOO products. It provides staking rewards, fee discounts, and governance rights across the WOO Network ecosystem.
Closing thoughts
The unique liquidity model that WOOFi uses was designed to mimic a traditional exchange’s order book to offer key benefits like deeper liquidity, more competitive prices, and overall a better DeFi trading experience. Those looking for reduced slippage can check out WOOFi and the larger WOO ecosystem for more information.