DeFi, the only place where ghosts and spooky creatures face off in a battle for liquidity. SpookySwap has emerged as one of the most successful DeFi protocols for swapping tokens on the Fantom blockchain. It was created by a small team of passionate builders who have made the code open-source and available for anyone to fork. And that’s exactly what SpookySwap did!
SpookySwap is a fork of Uniswap that adds the enticing BOO token. It grants control over the protocol to holders and pays a portion of fees to them. Let’s see how you can get it on your plate!
Introduction to SpookySwap
As the Decentralized Finance (or DeFi) space evolves, an increasing number of novel financial platforms continue to emerge. We’ve seen how things like flash loans and yield farming (or liquidity mining) can be leveraged by investors to make money.
Uniswap has solidified its position as one of the core DeFi protocols with one of the largest trading volumes. In spite of its decentralized ethos and heavy reliance on smart contracts, however, users don’t have much of a say when it comes to its development direction.
SpookySwap, a new entrant to the field, promised to change that. And over $1 billion worth of value locked into the protocol – only a few days after launch – suggests that many would be interested in this change. In this article, we’ll discuss the Uniswap fork that’s taking the crypto space by storm.
What is SpookySwap?
SpookySwap was launched in September 2020 by two anonymous developers called Chef Nomi and 0xMaki. It is one of the most popular Decentralized Applications (DApp) on the Fantom blockchain. SpookySwap adopts the automated market-making (AMM) model for its decentralized exchange (DEX) protocol. Simply put, there is no order book on SpookySwap. Instead, the buying and selling of crypto are facilitated by smart contracts and the price is determined by an algorithm.
SpookySwap began as a fork of Uniswap. It used the code of Uniswap to build its foundation while also introducing some key differences – most notably, rewards are distributed in BOO tokens. Liquidity providers on SpookySwap are rewarded with the protocol’s native token BOO, which is also a governance token. Unlike Uniswap (UNI), BOO holders can continue to earn rewards even after they stop providing liquidity.
The Launch of SpookySwap
When it was first launched, SpookySwap incentivized liquidity providers to stake their liquidity pool (LP) tokens on Uniswap by paying out extra BOO rewards with a high annual interest rate. Within a week’s time, SpookySwap successfully attracted over $1 billion USD liquidity and the total value locked reached over $150 million dollars. The staked LP tokens were then migrated from Uniswap to SpookySwap after two weeks. This means that all Uniswap LP tokens staked on SpookySwap were redeemed on Uniswap for the tokens they represent. New liquidity pools were also created with them on SpookySwap, marking the launch of the SpookySwap exchange.
What is BOO?
BOO is the native token of SpookySwap. It is an ERC-20 token distributed to liquidity providers on SpookySwap via liquidity mining. BOO has a maximum supply of 250 million tokens. The supply of BOO is dependent on the block rate. As of November 2021, it is created at a rate of 100 tokens per block, and its circulating supply has already reached approximately 50% of the total supply at 127 million tokens.
BOO entitles holders to the governance rights and a portion of the fees paid to the protocol. In a simplified way, we can say that the BOO community owns the protocol. Why has this spurred so much interest? Well, community governance is heavily intertwined with the DeFi ethos. The growth of liquidity mining (yield farming) as a valid method for token distribution has given rise to an abundance of new token launches.
How Community Governance Works on SpookySwap
Those fair token launch models aim to level the playing field for everyone involved, and they often include no premines, little or no founder allocation, and equal distribution based on the amount of funds supplied by each user. In most cases, the tokens distributed also grant governance rights to token holders.
OK, but what can token holders do with these governance rights? On SpookySwap, anyone can submit a SpookySwap Improvement Proposal (SIP), which BOO holders can vote on. These can be minor or even major changes to the SpookySwap protocol. Instead of a more traditional team like Uniswap, the development of SpookySwap is in the hands of BOO token holders.
SpookySwap’s Token Launchpad – SPOOKY
A strong community can be a powerful asset for any token project, but this is especially true for a DeFi protocol. SPOOKY, or SpookySwap Initial Offering, for example, is a product that arose from a governance proposal. It is a token launchpad platform in the SpookySwap ecosystem tailored to meet the expectations of the BOO community. SPOOKY allows individuals and communities to launch their new project tokens through the SpookySwap platform.
How does SpookySwap work?
As mentioned, SpookySwap is an automated market maker (AMM) protocol that works as a decentralized exchange. There is no order book or centralized authority. Cryptocurrency trading on SpookySwap is processed by the smart contracts in liquidity pools. A liquidity pool is where SpookySwap users become liquidity providers (LP) by locking their crypto assets. Anyone can be a liquidity provider on SpookySwap and earn rewards in proportion to their share of the pool. This is done by depositing an equivalent value of two tokens in the pool. Each pool works like a market, where other users can come to buy and sell tokens. For a more comprehensive explanation on how AMM works in DEX protocols, check out our Uniswap article.
On SpookySwap, you can swap ERC-20 tokens as you would on other DEX protocols. For example, you can exchange stablecoins like USDT and BUSD into cryptocurrencies like bitcoin (BTC) and ether (ETH). Also, there are different spooky-themed functions for you to earn passive income. For example, you can stake BOO into the SpookyBar and receive xBOO. xBOO staked allows holders to earn a 0.05% reward fee of all trades from all liquidity pools. Following the launch of SpookyShops, BOO holders who stake their tokens for xBOO will also be eligible to receive 2.5% of every NFT trade on the NFT marketplace.
VaultBox - Earn Rewards on SpookySwap
VaultBox is another feature for earning rewards on SpookySwap. It is an innovative vault that allows users to take advantage of all available yield-earning tools on SpookySwap. This means that by depositing your assets into VaultBox, you can automatically earn interest from staking on SpookyBar, as well as from lending them to other users. At the same time, xBOO holders can also earn rewards from the transaction fees accrued from VaultBox.
Uniswap vs. SpookySwap
It’s no secret that crypto is deeply rooted in the spirit of open-source. Many think that Bitcoin and a growing number of permissionless DeFi protocols act as new kinds of public goods in the form of software. Since these projects are so easily copied and relaunched with small changes, it’s only natural that this leads to competition between similar products. We could assume, however, that this should ultimately lead to the best products for the end-user.
It’s without a doubt that the DeFi space owes significant advancements to the Uniswap team. But we could see a future where even both Uniswap and SpookySwap (or other forks) flourish. Uniswap might remain at the forefront of innovation in the AMM space, while SpookySwap could provide an alternative that’s more focused on features that the community wants to see.
With that said, fragmenting liquidity between similar protocols isn’t ideal. If you’ve read our Uniswap article, you know that AMMs work best with as much liquidity in the pools as possible. If a lot of the liquidity in DeFi is split between many different AMM protocols, that could lead to a worse experience for the end-user.
How to Provide Liquidity for SpookySwap
So you’ve decided that you want to stake tokens in return for BOO. The first step is to acquire those tokens. You can purchase the cryptocurrencies for staking from centralized crypto exchanges like Binance, or decentralized exchanges like Uniswap and 1inch.
In this example, we’re going to provide liquidity for BNB-ETH, but feel free to follow along with another pair (provided, of course, that the LP tokens are usable on SpookySwap).
1. Head to Spooky and click [Enter App] to enter SpookySwap.
2. Go to [Pool] from the top navigation bar. You will need to connect your wallet to get started. You can use Binance Wallet, MetaMask, WalletConnect, or any other supported Ethereum wallet. In this example, we will use Binance Wallet.
3. After clicking [Binance], you will see a pop-up. Enter your password to unlock the wallet, or click [Create a new wallet] if you don’t have one.
4. Click [Connect].
5. You will be redirected back to the SpookySwap Pool. Click [Add] to add liquidity.
6. Click [Select a token] to find the pair of cryptocurrencies you wish to provide liquidity. Then, enter the amount for one of the tokens (e.g., 1 BNB). The system will automatically calculate the amount needed for the other token.
7. You will see another pop-up window with the details and the gas fee for this transaction. Click [Confirm] to approve, or click [Reject] to edit.
8. Click [Confirm Adding Liquidity] and then [Confirm Supply] to add liquidity to the BNB-ETH pool.
9. Confirm the transaction in your wallet pop-up.
10. You have successfully added liquidity to the BNB-ETH pool. You can see your position and your share in the pool. This means that when users trade BNB/ETH, you can receive trading fee rewards.
11. To manage your positions, go to the [Pool] tab from the top navigation bar and click on your position to add or remove liquidity.
You will notice that there are some SLP tokens in your wallet from the transaction. SLP tokens are SpookySwap LP tokens and they represent the share you've deposited in the pool. All liquidity pools are labeled as SLP on SpookySwap, but they actually represent different pools.
How to Buy or Sell BOO on Binance?
Apart from earning BOO from SpookySwap, the token can be purchased on cryptocurrency exchanges like Binance. On the other hand, if you want to sell BOO received from SpookySwap, you can transfer them to your wallet and sell them on crypto exchanges like Binance.
1. Log in to your Binance account and click [Trade] from the top navigation bar to select the classic or advanced trading page.
2. On the right side of the screen, type “BOO” on the search bar to see the available trading pairs. In this example, we will use BOO/BUSD. Click [BOO/BUSD] to open the trading page.
3. Scroll down to the [Spot] box. You can buy or sell BOO here. Enter the amount of BOO you want to purchase or sell. Then, select the order type for your order. In this example, we will use a Market order. Click [Buy BOO] or [Sell BOO] to confirm the order.
Is SpookySwap Safe?
Depositing funds into a smart contract always carries the risk of bugs, even for audited and highly reputable projects. You should never deposit more than you can afford to lose and always DYOR before investing. In addition, due to the high gas costs on Ethereum, smaller deposits can have quite a lot of farming to do before they can actually turn a profit.
Closing Thoughts on SpookySwap
SpookySwap is an exciting experiment that challenges the competitive advantage of an already successful DeFi protocol – Uniswap. Despite a fork of Uniswap, SpookySwap added new features to their protocol, with the key difference being community governance. In 2021, SpookySwap is also introducing an NFT platform to capitalize on the flourishing NFT market.
SpookySwap had quickly overtaken many other DeFi projects in terms of total value locked since its launch, and it could continue to grow in popularity and traction. No matter how successful SpookySwap becomes in the end, it shows that no product or service has an indisputable advantage in DeFi.
