# (2/2) What is INTSWAP By [Intswap](https://paragraph.com/@intswap) · 2023-03-24 --- **Intswap is the first  multichain NFT AMM enables LP Mining by staking NFT/FT LP Tokens to earn compound trading fee, royalty fee and beyond.** Intswap has three core designs making it more competitive, including **aggregated Liquidity Providers (LPs), Dynamic Concentrated Liquidity and Liquidity Mining incentive for NFT LPs**. Hence, as an innovative NFT AMM, Intswap has the characteristics of noncustodial, higher capital efficiency and better trading experience. In addition, it brings a more sustainable token economic model to NFT stakeholders. NFT Marketplace Track --------------------- In recent years, NFT is developing real fast as a new type of crypto asset, innovation surrounding NFT has surged up. Among them, NFT Marketplace is a hot spot for innovation. Upon our analysis, currently there are the following main types of NFT marketplaces: * **Order Match:** For example, Opensea, this kind of trading market uses order matching to facilitate transactions. This type of product usually adopts the development paradigm of off-chain matching and on-chain settlement. Intswap believes that the centralization problem of this mechanism is serious. First, the matching of orders relies on off-chain operations, and fairness and credibility cannot be well guaranteed. Second, the trading market can usually decide on and off the NFT project at will, so the rights and interests of the NFT project party cannot be effectively protected. * **Fragmentation:** Generally speaking, fragmentation mainly solves the problem of poor liquidity of NFT assets. This type of product allows NFT holders to stake and lock a certain NFT and an equivalent amount of Fungible Token (considering the accuracy of FT) will be minted and transferred to the owners. Consequently, this type of FT can be traded through the existing FT-enabled market, and any user can use the same amount of FT to redeem the staked NFT assets. Intswap believes that there are three problems with this mechanism. First, FT prices cannot effectively reflect the real situation of NFT prices. Second, fragmented assets have no actual use value. Third, they are often prone to governance risks and cannot effectively protect all relevant stakeholders. * **Sub-Pool:** Sudoswap, for example, usually relies on users to create on-chain smart contracts called sub-pool with AMM functions to implement limit orders for NFTs. Usually, such markets include Trader and Liquidity Provider (LP), which earn income by providing liquidity. Intswap believes that there are two problems with this mechanism. First, there is a lack of effective liquidity incentives. In Sub-Pool, there is no unified standard for LP parameters, and the liquidity provision in each Sub-Pool is different. In theory, it is impossible to effectively quantify the contribution of LP to liquidity, and it is impossible to reuse the DeFi incentive paradigm. Second, LP’s market-making costs are expensive. In Sub-Pool, LPs are in a competitive relationship, and LPs need to actively adjust market-making related settings to obtain higher returns, which makes LPs have to face higher gas costs. Since the value of automated market makers (AMM) in Fungible Token transactions are widely spread and recognized. In theory, the exchange ratio of the crypto assets pair is constructed through mathematical models during the exchange process. On the one hand, the simulation of matching the market based on the order book is realized at a lower execution cost. On the other hand, the restrictions on the performance and cost of the underlying chain infrastructure are greatly eliminated. We believe that AMM has great potential for marketplaces for NFTs without significant differences, such as PFP NFT Series. **Based on this, we have designed a suitable NFT AMM Marketplace — Intswap. This Protocol has three major features:** ![](https://storage.googleapis.com/papyrus_images/862db9bfbb2e663941cf32fba26007487df182f346d9a4bfbb42b4d6b2694e24.png) Advantages of Intswap --------------------- Intswap mainly has the following three advantages: * **NFT AMM with aggregated Liquidity Providers (LPs)**: In Intswap, all LPs provide liquidity to NFT AMMs in an aggregated way, earn market making fees in the form of compound interest, and use an interest-bearing LP Fungible Token as the provider’s liquidity certificate. * **Dynamic** **Concentrated Liquidity**: In order to meet the trading characteristics of the NFT market, we have designed an AMM with concentrated liquidity . AMM price ranges can be set to a specific range to reduce trading slippage. In addition, price ranges are allowed to be updated during the market making process, which greatly increases the flexibility. * **Liquidity Mining for NFT LP incentive:** We have designed a modular NFT LP incentive platform and designed two specific incentive strategies. Intswap’s LPs can participate in profit sharing through STAKE LP Tokens to increase their mining revenue. ### NFT AMM with aggregated Liquidity Providers (LPs) We believe that the aggregation of LPs is very important for AMM. The advantages include the following two points: first, the operation is simple and low-cost, and there is no need for LPs to update quotations frequently to gain a competitive advantage due to high gas costs. Second, strong interoperability. By creating the NFT AMM with aggregated LPs, Intswap not only ensures ease of use and low cost, but also greatly enhances the interoperability of the protocol, bearing great potential for network value. Users can easily exchange between Fungible Token and Non Fungible Token from Intswap. At the same time, you can also become a Liquidity Provider by providing Base Token and NFT to the fund pool according to a certain ratio, and earn Trader’s transaction fees. **Add liquidity** Different from Sub-Pool, Intswap adopts the method of aggregating LP, so that one type of NFT has only one pool, and all liquidity providers of the same type of NFT are in the same pool, maximizing the depth of the pool. In addition, Intswap changed the active market-making into passive market-making. LPs do not need to monitor prices in real time and make frequent adjustments. They only need to provide liquidity, and smart contracts monitor prices to choose the maximum income for LPs and reduce gas fees. LP is no longer a competitive relationship in the Sub-Pool. All LPs work together to contribute to the NFT pool and distribute rewards according to their proportion in the liquidity pool. In Intswap, each corresponding pool will issue a tradable Fungible ERC-20 Token to serve as LP’s liquidity certificate, which is used to effectively quantify LP’s contribution to the pool. LP will mint the LP token for it during the add liquidity process, and burn the user’s LP Token during the remove liquidity process. ![](https://storage.googleapis.com/papyrus_images/d09baba1274b57a03fb30461454a150598ef53242f53a585fae42ed8c6d146b2.png) In Intswap, the share of trading fees is distributed using a compound interest method. The user does not need to actively collect it, and each trading fee share is automatically accumulated into the user’s liquidity principal, thus increasing the user’s market-making revenue as much as possible. **Remove liquidity** When LP is removing liquidity, due to the fluctuation of NFT price in the pool, it has to face a non-integer situation. When the user chooses to redeem, assuming that the NFT assets in the pool are 10.4, Intswap allows the user to perform the following three operations: (1) Not fully redeemed. If the user freely chooses to redeem less than 10 NFTs, the corresponding number of Base Tokens will be redeemed. (2) Liquidity is fully redeemed and NFTs are rounded up. That is to say, the user actively purchases 0.6 units of NFT (a total of 11 NFTs), and withdraws all Base Token (deducting the funds spent on purchasing 0.6 NFT). (3) Liquidity is fully redeemed and NFTs are rounded down. That is to say, the user actively sells 0.4 units of NFT (the remaining 10 NFTs), and withdraws all Base Tokens (plus the proceeds from selling 0.4 NFT). **Royalty Supported** In Intswap, creators are allowed to set a reasonable Royalty Ratio accordingly. Intswap will collect Royalty in each transaction based on its own economic model system and combined with this parameter, and deposit it in the protocol’s Royalty Vault. Royalty Vault is an on-chain smart contract that allows Creators to withdraw in batches. ### Dynamic Concentrated Liquidity Intswap achieves dynamic concentrated liquidity through innovative mechanism design, making its AMM more in line with the trading characteristics of NFT Marketplace, and the user’s transaction slippage is small. Intswap introduces virtual liquidity, so that all liquidity is concentrated in a reasonable price range, so as to provide higher liquidity and greater capital efficiency through limited funds to reduce transaction slippage costs. ![](https://storage.googleapis.com/papyrus_images/68f477499a4c8f3a0541b72feb51aa0707e7616df29bd8c69d957136d9f934d6.png) When purchasing the same amount of NFT, users need to spend less Base Token to purchase in Concentrated Liquidity’s AMM, and the average purchase price is lower. On the contrary, when users sell NFT, they get more Base Token and the average selling price is higher. To sum up, this shows that the concentration of liquidity will reduce the transaction slippage of users and improve the transaction experience of NFT AMM. ### Liquidity Mining for NFT LP incentive We know that for any trading subject matter, liquidity is essential. This directly affects how difficult it is for potential traders to reach consensus around the underlying object. A highly liquid asset often has higher transaction activity. The current main business model of NFT Creator is to rely on royalty to maintain operations, while LP is an important force ignored by the market. Therefore, we design an effective incentive scheme for NFT LP, namely Liquidity Mining for LP incentive. Intswap has designed a modular NFT LP incentive platform. Intswap’s LPs can participate in profit sharing by stake LP Token and increase their own income. Currently supported incentive strategies include the following three: **Royalty Distribution、Yield Farming and Custom Incentive Strategy.** ![](https://storage.googleapis.com/papyrus_images/198f0e77509d578044a245c045f827f7f55ae0490eefe0e96275f19a6cf170ab.png) **Royalty Reward Distribution:** The creator can use the corresponding proportion of the funds in the Royalty generated by each transaction as a reward, and distribute it to all LPs in the staking pool according to the staking ratio, and the profit sharing is completed immediately along with the NFT transaction. **Yield Farming:** Allow NFT Creator to lock a certain number of ERC20 Tokens as Reward Tokens and set the reward period. Rewards will be distributed according to the proportion of LP staking in the staking pool, and will be distributed in seconds. **Custom Incentive Strategy:** In addition to the above two incentives, NFT Creator is also allowed to customize incentive strategies. ### INTSWAP Intswap is the first  multichain NFT AMM enables LP Mining by staking NFT/FT LP Tokens to earn compound trading fee, royalty fee and beyond. Intswap aims to Build DeFi into NFT. Intswap is a core piece of defi infrastructure that seeks to both improve NFT liquidity and become a middleware between NFT creators, traders and liquidity providers. _🌐Website:_ [_https://intswap.io/_](https://intswap.io/) _🐦Twitter:_ [_https://twitter.com/Intswap\_amm_](https://twitter.com/Intswap_amm) _🔗Discord:_ [_https://discord.gg/cvPJAz2Bms_](https://discord.gg/cvPJAz2Bms) _📔Github:_ [_https://github.com/Intswap-Labs/intswap-core-v1_](https://github.com/Intswap-Labs/intswap-core-v1) _📗Whitepaper:_ [_https://docsend.com/view/z53i4vmytmmj4f2b_](https://docsend.com/view/z53i4vmytmmj4f2b) _📑Deck:_ [_https://docsend.com/view/vfmh7daywzm3abny_](https://docsend.com/view/vfmh7daywzm3abny) --- *Originally published on [Intswap](https://paragraph.com/@intswap/2-2-what-is-intswap)*