This article is for information purposes only and is not intended to comment on the viability of FalconSwap (FSW). As with any cryptocurrency projects it involves a huge amount of risk. Anyone intending to participate should do full research and consider carefully the risks involved beforehand.
FalconSwap ($FSW) is a layer-2 scaling solution built on Uniswap and further extendable to aggregate other Decentralised Finance (DeFi) platforms like Mooniswap, Kyber, Balancer, Airswap, and Bancor. It aims to solve the ongoing issues in the Ethereum ecosystem like high transaction fees, slippage in trading, lack of privacy, slow transactions, and poor user experience.
- The platform promises to offer features like Layer-2 Order Matching, DEX Aggregation, Lower trading fees, Low Slippage, Additional Privacy, and Faster Transactions.
- The FalconSwap (FSW) tokens are designed to incentivize token holders and platform users by offering Fee discounts, Staking rewards, Token burns, and Liquidity mining features.
- Potential Red flags include lack of a Whitepaper and roadmap, no public Github profile, an anonymous Team, and Investor uncertainty.
- Can the team overcome these hurdles to capture market share from the existing players and establish themselves as the go-to solution for Ethereum scaling?
What is FalconSwap trying to solve?
DeFi platforms have gained immense traction in the 3rd quarter of 2020. As per data from DeFi pulse, the total value locked in DeFi protocols has surged from close to USD$1 billion in June to $9 billion in September. Uniswap has emerged as the most sought-after platform to trade and swap digital assets on the Ethereum blockchain. On August 30, 2020, Uniswap became the first decentralised exchange (DEX) to overtake the biggest US-based crypto exchange, Coinbase.
However, as the DeFi community continues to push their activity beyond network limits, congestion on the network has led to an increasing number of unconfirmed transactions, longer wait times, and higher fees as users compete to get their transactions confirmed faster, making it an extremely crucial roadblock for the future of Ethereum as a smart contract platform. Ethereum Gas fees have skyrocketed in recent months with over 5,869 ETH (US$2.17 million) spent as per the latest data from Glassnode, with fees as high as 15,374 ETH (US$ 3.5million) recorded on June 11, 2020.
There is therefore an immediate need to solve the Ethereum scaling issue to enable users and projects make the most of the growing DeFi ecosystem. This is where FalconSwap aims to provide a solution.
Calling itself the “The Powerhouse for DeFi”, FalconSwap operates as a second layer solution on Uniswap and other DeFi platforms. It aims to solves the ongoing issues of high transaction fees, slippage in trading, lack of privacy, slow transactions and poor user experience in the Ethereum ecosystem. This it plans to do by offering the following features:
- Layer-2 Order Matching: Orders are matched in Layer-2 and aggregated before accessing the liquidity from Uniswap pools.
- DEX Aggregation: Orders are aggregated across multiple liquidity pools like Uniswap, Mooniswap, Balancer, Kyber, and so on.
- Lower trading fees: Aggregating orders distribute the transaction fees across multiple users thereby lowering fees per user.
- Low Slippage: Aggregating platforms provide a larger liquidity pool to execute orders thereby lowering slippage in trading.
- Privacy: Layer-2 orders matching occurs without on-chain knowledge of the trade.
- Faster Transactions: Faster transactions powered by the aggregating and executing of several trades in Layer-2.
To understand this better, let us assume there are 3 buyers buying 2 ETH, 3 ETH and 5 ETH worth of tokens respectively, and 3 sellers selling 6 ETH, 6 ETH and 8 ETH worth of orders respectively.
Using the current trading approach on Uniswap, every user would pay for their own gas fees and the total fees spent would be 6x the gas fees per order. User might also experience transaction slippage and even higher fees if their orders are distributed among multiple liquidity pools.
However, when the above-mentioned trades are placed and executed on the FalconSwap platform, the protocol would aggregate 6 orders matching the 10 ETH worth of buy orders with 10 ETH worth of sell orders. The remaining 10 ETH worth of sell orders will then be sent to Uniswap or distributed among different liquidity pools. This would help optimize gas fees per user and minimise slippage.
FalconSwap token ($FSW)
FalconSwap tokenomics are designed to incentivize users and token holders in the following manner:
- Fee discounts: FSW token holders get additional fees discount of up to 50% to use FalconSwap over and above the fee savings from Layer-2 trade execution.
- Staking: A part of the fees collected from the FalconSwap protocol will be used to buy FSW tokens from the market and distributed to the FSW token staking holders.
- Token burn: FSW is a deflationary token. 10% of the fees collected will be used to buy FSW tokens from the market and burned.
- Liquidity mining: Users mine FSW tokens when they trade on FalconSwap.
As at September 4, 2020, FSW token ranks 381 out of 5890 coins listed on CoinGecko. The current token circulating supply is 33 million with a max supply of 100 million. The FSW Token are currently available for purchase on Uniswap V2 (ETH/FSW) and Hotbit exchanges.
FalconSwap testnet results
On August 27, 2020 the team reported successfully completing their first milestone, which was to build a decentralized protocol to aggregate orders on Uniswap and publicly shared the test net results with the community. As per the results, trading on FalconSwap offered Gas savings of approximately 64% per transaction when compared to Uniswap.
Potential red flags: Is FalconSwap legit?
FalconSwap has several aspects to it which makes us question the legitimacy of the project, for example, the lack of whitepaper and Github. We also have concerns about the fact that the team is anonymous and queries whether they are indeed backed by the investors as claimed. Concerning these questions, we contacted the FalconSwap team and they were kind enough to promptly respond. Below are details of our concerns on FalconSwap and the response from the team.
Undoubtedly the most important document for any upcoming project is a detailed and structured whitepaper with a clear road map for potential investors. It is the first litmus test a project needs to clear to be considered trustworthy. FalconSwap has not yet published its whitepaper to the community.
According to the team, there is no white paper because the team is already aiming to launch the final product by the end of September 2020 and have partnered with companies like DEX Tools for initial liquidity mining, trading, and integrations. The roadmap is set to be presented along with the product launch.
Most projects today have an active Github profile where they regularly provide updates to the progress on their code for peer review and fault identification by the community. FalconSwap doesn’t have any such public Github profile. As to this issue, the FalconSwap team says that their GitHub has not been made public so they can have an edge on competitors and avoid their code being copied. However, it will also be made public post product launch.
Another potential red flag is that the team is anonymous. To be fair, there are some projects where teams opt to stay anonymous due to the threat of a potential government crackdown or operational risk. However, these projects overcompensate by being transparent on all the other aspects of their projects to magnify trust, which FalconSwap currently lacks. When we asked the team on this, they responded that they decided to stay anonymous to avoid any adverse effect on operations.
The FalconSwap website mentions 6 trusted partners namely Fengshui Capital, Tenzor Capital, TRG Capital, Mapleblock Capital, Magnus Capital, and Black Dragon. However, apart from Fengshui Capital, No partner has listed FalconSwap as part of their investment portfolios on their own respective websites.
We note that whether investors or partners mention FalconSwap on their website or not is beyond the control of the FalconSwap team. From our further research, we note that TRG Capital Director Etienne VantKruys tweeted about FalconSwap. We also note that some of the FalconSwap community members did their own research and emailed investors to confirm the veracity of their partnerships with FalconSwap. It was confirmed by those Community members that they got positive responses.
FalconSwap clearly has identified an important issue plaguing the Ethereum ecosystem. Their Layer-2 transaction aggregation solution might be one of the best answers to scale Ethereum and lower fees. The team therefore has a very small window to bring the product into the market since the Uniswap team are also working on their Layer-2 solution expected to be launched later this year.
Moreover, healthy competition is expected from the newly launched Polkadot protocol which already enables cross-blockchain transfers of any type of data, asset, or tokens along with transactional scalability by spreading transactions across multiple parallel blockchains. Ethereum itself could scale very soon, unclogging the network, lowering fees and boosting transaction speed, leaving very little incentive to use the FalconSwap platform in the future.
However, if the team delivers by launching the platform within the promised timeline and make the code publicly available to the community, it can surely capture significant market share from the existing players, gain community trust and establish themselves as THE go-to solution for Ethereum scaling.