The birth of the idea
While Solana has multiple exchange protocols, the most advanced ones appear to focus on other blockchains. That is something we want Invariant to change. We decided to bring Uniswap v3 to Solana, because its concept of providing liquidity only within a certain range seemed the most promising.
At first glance, Invariant may appear to be another exchange with liquidity providers, swaps, and trade fees. What distinct it from the rest is the functionality of providing liquidity only within certain price ranges. This has an effect of keeping the liquidity where the price currently is and thus where it is most needed. As liquidity is more efficient on Invariant, it stands to reason that trades will benefit from it. It results in a lower fee on trades by an order of magnitude. You can choose from 0.01 percent, 0.05 percent, 0.1 percent, 0.3 percent, and percent fee levels. Furthermore, users benefit from increased virtual liquidity, which results in less slippage on trades.
Furthermore, users benefit from increased virtual liquidity, which translates into smaller slippage on trades. Liquidity concentration enables much higher efficiency than traditional AMMs. In other words, producing the same amount of liquidity requires fewer tokens. Keeping liquidity close to the price can boost this effect even more.
Invariant is fully-permissionless DEX and is designed to allow more capital efficiency and flexible transaction fees.
Comparing Invariant to common exchanges
Invariant is an AMM decentralized exchange, based on liquidity pools instead of an order book.
AMMs (Automated Market Makers) are autonomous smart contracts deployed on a blockchain that make markets between different assets that live on that chain. Cryptocurrencies are aggregated in liquidity pools to facilitate this automated trading. They enable functioning in environments with restricted resources, such as public blockchain.
Order book vs AMM
Order book is a mechanism that you can find on most exchanges, starting with NASDAQ and ending with FTX.
In short, the centralized order book is the middleman between Trader A and Trader B. We have got rid of this middleman — Invariant is based on liquidity pools.
This system excludes counterparties in the traditional sense, as trades happen between a user and a program (smart contract).
The liquidity is provided by liquidity providers who earn passive income on their deposit due to trading fees, based on the share of the liquidity pool that they provide.