ERC-1919 improves on Dutch auctions and node sales.
Written by: 0xJermo
Compiled by Peng Sun, Foresight News
Degen is Degen, but just a few days ago, AIR on Base launched a new mechanism called ERC-1919. So what is this ERC-1919?
The problem with DEX trading is not necessarily a lack of liquidity, there may also be a risk of liquidity being maliciously attacked by anonymous developers.
AIR's solution addresses exactly this problem. The concept of ERC-1919 is not difficult to understand. I even think it's simpler than a regular Uni V3 (or even Uni V2) pool. In other words, if ERC-1919 is used, there is no need for a DEX, and there is no need for LPs to provide liquidity to the capital pool.
Instead of the traditional 50/50 LP model where prices are determined based on supply and demand, they use a multi-tiered mechanism. In this particular case, the price increases or decreases by a predetermined Delta value of 0.8% per tier.
The number of tokens in each tier is predetermined in the contract. If demand surges, the price will rise and ETH earnings will decrease relatively. When selling pressure is greater than buying pressure, the price will fall back to the previous level. If the buy/sell order is too large and a single price level cannot handle it, the nearest tier will be filled and then continue to upgrade or fall back.
The great thing about this system is that you know what you are getting out of the system, and once you sell your tokens they are downgraded (and destroyed).
I think what’s fascinating about this mechanism is its potential for various future use cases like modified Dutch auctions, tier-based node sales, etc. Beyond that, I find it pretty cool that this approach completely eliminates the issue of counterparty risk (since developers can’t Rug after launching an LP).