How Trader Joe Became the Top DEX on Avalanche and Arbitrum

Trader Joe is a decentralized exchange (DEX) that offers a range of services, such as liquidity provision, lending, borrowing, and farming. The platform has seen impressive growth in 2023, thanks to its innovative Liquidity Book model and its expansion to Arbitrum, a scaling solution for Ethereum.

What is Trader Joe?

Trader Joe is an automated market maker (AMM) based DEX that launched in July 2021 on Avalanche, a blockchain that aims to provide fast, cheap, and secure transactions. Trader Joe allows users to swap tokens, provide liquidity, earn rewards, lend and borrow assets, and leverage their positions.

The platform has its own native token, JOE, which is used for governance and incentives. JOE holders can vote on proposals and receive a share of the protocol’s fees. JOE also powers the xJOE token, which is a staking token that earns rewards from various pools and farms.

What is Liquidity Book?

Liquidity Book is a feature that Trader Joe introduced in November 2021 to improve the efficiency and profitability of liquidity provision. Liquidity Book is inspired by Uniswap v3, which allows users to provide liquidity along specific price ranges instead of the entire curve.

However, Liquidity Book differs from Uniswap v3 in that it divides liquidity into discrete price bands called “bins”. Each bin has a fixed size and a fixed fee rate. Users can choose which bin they want to deposit their liquidity into, depending on their risk appetite and price expectations.

The advantage of Liquidity Book’s bin model is that it reduces slippage and impermanent loss for liquidity providers. Slippage is the amount a trade changes the price of the assets involved, and often cuts into traders’ bottom line. Impermanent loss is the loss of potential profit that occurs when the price of the assets in a pool diverges from their original ratio.

By providing liquidity in a specific bin, users can avoid slippage and impermanent loss if the price stays within that bin. They can also earn higher fees than other bins if there is high demand for that price range. Users can also move their liquidity from one bin to another if they want to adjust their exposure or capture new opportunities.

How Trader Joe Expanded to Arbitrum

Trader Joe also launched on Arbitrum at the end of December 2021. Arbitrum is a layer 2 scaling solution for Ethereum that aims to reduce gas fees and increase throughput. Arbitrum uses optimistic rollups, which are a technique that bundles transactions together and submits them to Ethereum as a single proof.

By launching on Arbitrum, Trader Joe can tap into the large and diverse ecosystem of Ethereum-based tokens and projects. Users can easily bridge their assets from Ethereum to Arbitrum using Trader Joe’s Bridge UI. They can also enjoy faster and cheaper transactions on Trader Joe’s Arbitrum version.

Trader Joe’s expansion to Arbitrum was also rewarded by Arbitrum itself. The DEX was one of the recipients of an airdrop by Arbitrum to decentralized organizations (DAOs) in January 2023. Trader Joe received over 900,000 ARB tokens, which are used for governance and staking on Arbitrum.

Fastest-Growing DEX

In conclusion, Trader Joe is a one-stop decentralized trading platform that offers a variety of DeFi services on the Avalanche blockchain. The platform has seen a rapid growth in its user base, liquidity and trading volume since its launch in June 2021. Its native token, JOE, has also performed well in the market, reaching a high of $5.32 on March 28, 2023. Trader Joe aims to provide a fast, cheap and user-friendly experience for traders who want to access the Avalanche ecosystem and its diverse range of tokens, NFTs and lending products.