What is SundaeSwap?
Do you feel like Cardano is a ghost town? Well, it's time that you give SundaeSwap a chance. As one of the first DEXs to launch on Cardano, SundaeSwap is paving the way for DeFi on the network. It's the perfect place to swap your favorite Cardano-based tokens, and it offers a unique opportunity for users to get value out of their ADA tokens.
But SundaeSwap is more than just a place to trade – it's also adding value to the Cardano network. By expanding the range of opportunities available to its users, SundaeSwap is exposing users to the coolest projects in the Cardano ecosystem. And the cherry on top, SundaeSwap has some of the lowest fees in the cryptoverse – around 0.16 ADA per transaction.
The story of SundaeSwap began in 2021, when Cardano was warming up for the launch of its smart contracts. The Cardano community was eager to test out the first AMM on Cardano, therefore SundaeSwap gained traction from day 1.
After months of testing with smaller groups, on September 11, 2021, SundaeSwap launched on public mainnet. The launch, however, came with a series of "surprises."
Right out of the bat, users reported failing transactions. This was because Cardano's UTXO model, and what was later called the "concurrency issue" – more on that in the "how does SundaeSwap work" section.
SundaeSwap also has a native token, called SUNDAE. It is a governance token that incentivizes users to participate in the protocol by providing liquidity. On SundaeSwap, users have the final say in the direction of the protocol. Their governing decision extend to fees, token listings, and other governance matters.
In the coming future, SUNDAE will be used to distribute the protocol fees among the token holders. While the team hasn't provided the mechanisms for these decentralized profits, it is part of their roadmap.
As of 2023, SundaeSwap is edging closer to the governance mainnet. This means SundaeSwap DAO will be in charge of the protocol. The SundaeSwap team has created a governance framework and gasless votes. Later in 2023, SundaeSwap DAO will hold its first governance vote.
What sets SundaeSwap apart from other DEXs is its focus on accessibility. It's designed to be a platform that anyone (literally anyone) can use – no KYC is required. Whether you're a seasoned trader or a complete newbie, SundaeSwap's intuitive interface and user-friendly design make it easy for anyone to start trading in no time.
Because SundaeSwap is somewhat of an experimental protocol for Cardano, the DEX is launched with limited functionalities. On the good side, SundaeSwap has never been hacked, and hacks on Cardano are harder to orchestrate due to network's architecture. In the next section, we will see how SundaeSwap works.
How does SundaeSwap work?
SundaeSwap is a decentralized exchange for trading native Cardano tokens on the Cardano blockchain. The protocol is defined by a series of immutable, permissionless, and decentralized smart contracts built on Cardano using Plutus, the smart contract programming language of the Cardano blockchain. These smart contracts enable users to trade in a non-custodial fashion, without any restriction.
At first glance, SundaeSwap is an automated market maker (AMM) adapted after Uniswap. In this model, liquidity providers deposit equal values of two assets in a smart contract, and receive liquidity tokens representing their position. For example, suppose a WBTC/WETH liquidity pool has 9 WBTC and 90 WETH and has issued 10 total LP tokens to previous liquidity providers.
If a user deposits 1 WBTC and 10 WETH, since those represent 10% of the total value in the pool, the smart contract issues 1 new LP token, for a total of 10. In this case, the user contributed 1/10th of the new pool value, so they own 10% of the pool. This means that they are entitled to 10% of the trading fees generated by the pool.
The above method translates well for Solidity, which is the smart programming language for Ethereum. Cardano, however, uses a novel accounting and execution model, known as “Extended Unspent Transaction Outputs” (eUTXOs), which makes the AMM model more complicated.
In the UTXO model, every transaction consists of a set of inputs and outputs. The inputs refer to previous transaction outputs that have not yet been spent, while the outputs specify where the new assets should be sent. This is how Bitcoin transactions work.
The eUTXO model extends this concept by adding more complexity to the outputs. In addition to specifying where the assets should be sent, the output also includes a smart contract that defines the rules for spending those assets. This means that transactions can be more sophisticated, and can include conditions such as time locks, multi-signatures, or other forms of programmable logic.
Here comes the actual problem with using the eUTXO model for decentralized exchanges: because any given eUTXO can only be spent once, as part of one transaction, it means only one swap can happen per block. On the Cardano blockchain, there is roughly one block every 20 seconds. This would be dreadful throughput for a decentralized exchange.
As of 2023, the only actions users can do on. SundaeSwap is to swap tokens and provide liquidity. The team at SundaeSwap is working along with IOHK (the development arm of Cardano) to overcome its design flaws.
How to make money on SundaeSwap?
Feeling a bit bummed? Lift your chin, Cardano solider, this FUD shall too pass. What better thing to do on Cardano anyway aside from staking? If you have some ADA sitting in your wallet, let's explore a couple ways you can make money on SundaeSwap.
The first method is by doing swaps as a method to make profits from arbitrage – buy low, sell high (not the other way around!)
To make a swap on SundaeSwap follow these steps:
1. Open the SundaeSwap app
2. Navigate to the "Swap" tab
3. Select the tokens to swap
4. Enter the input and output amount
5. Click "Order Swap"
Another way to make money on SundaeSwap is by providing liquidity. In addition to the transaction fees, users are rewarded in SUNDAE tokens which can be traded.
To provide liquidity on SundaeSwap, follow these steps:
1. Open the SundaeSwap app
2. Navigate to the "Home" tab
3. Select or search for a liquidity pool you'd like to provide liquidity to
4. Click on the "More" button on the right-hand side of the liquidity pool, and click on "Provide Liquidity"
5. Enter the amount of tokens you would like to provide to the liquidity pool
6. Once you have entered the amounts of tokens you would like to provide to the liquidity pool, review, approve, and provide your liquidity!
Not only you can deposit liquidity, but you can also create your own liquidity pool on SundaeSwap. Considering that DeFi projects on Cardano are still early, you can take advantage of the opportunity and establish your own liquidity pool for others to use. As the liquidity pool grows, it will attract more users, resulting in even more transaction fees shared among the LPs.
To build your own liquidity pool on SundaeSwap, follow these steps:
1. Open the SundaeSwap app
2. On the right hand side, click the "Create Pool" button
3. Select a pair of tokens to create the liquidity pool for
4. Enter the amount of tokens you would like to provide to create the liquidity pool
5. Select the fee tier of your choice
6. Review and order your deposit to create a new liquidity pool
Price Prediction for SundaeSwap — Can it hit $1000?
Buying and hodling SUNDAE — the native token of SundaeSwap — is one way of potentially making money on SundaeSwap.
By looking at its current price, it’s natural to think about the chance of SUNDAE hitting $1000 per token. This can happen sooner, or way in the future, and is determined by a couple of ever changing factors.
Let’s examine the potential growth of the SUNDAE token by analyzing its tokenomics. SUNDAE’s current market cap sits comfortably at ${MARKET_CAP}. With {CIRCULATING_SUPPLY} SUNDAE tokens being in circulation today, that means a price of {PRICE} per SUNDAE.
How did we come to that calculation? It’s quite easy, the price of a SUNDAE token is equal to its current market cap divided by the number of tokens in circulation. Dividing ${MARKET_CAP} by {CIRCULATING_SUPPLY} gives us a result of {PRICE} for each SUNDAE coin.
By changing the order in the simple formula above we can use it to calculate other things as well. This helps us a lot because we can deduce the market cap of SUNDAE at different token prices. Then, we can use the result to compare it to the current state of the network and see what would be required for SUNDAE to hit that price.
At a price of $1000 per token, that means the current market cap of SUNDAE would equal ${{CIRCULATING_SUPPLY} * 1000}. Remember that we arrived at this number by multiplying the amount of circulating tokens by $1000.
Now let’s shift our attention to the fully diluted market cap.
Some blockchains may have their tokenomics built in a way that only a small percentage of tokens are circulating at the beginning. This can be misleading because we don’t have the full picture and only take into account the current number of coins released in the market.
The fully diluted market cap represents the total value of a coin if all tokens were in circulation. SUNDAE’s whole supply of tokens is {MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY} SUNDAE which means that no more coins above that number will ever be created.
SundaeSwap has no maximum supply, which means there’s no cap on the maximum of tokens that can be issued.
These tokens are not created at the discretion of a specific entity. They are created automatically by the network to reward different actors that keep it secure.
How does this impact the price of SUNDAE? Taking into account the current price of a SUNDAE token, that would result in a fully diluted market cap of ${MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY * PRICE}. SUNDAE coins that have been burned are not taken into consideration because they have been permanently removed from circulation.
Whether it seems gigantic or not, the number we came to above only takes into account the current price of a SUNDAE token. Doing the same calculation but with a price of $1000 gives us a result of ${{MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY} * 1000} for the SUNDAE protocol fully diluted market cap.
These are all crucial details to know when calculating if SUNDAE can reach the price of $1000 per token. If the diluted market capitalization is way too high, the token has little room left to grow. Blockchains in general have no cap on the value they can reach, whether that number seems possible it’s totally up to you.
The future of SUNDAE depends solely on its growth as a network used by tens and hundreds of millions of users.
If you’re looking to add some SUNDAE to your portfolio, the most trusted places to get some are Binance and Coinbase.
