On all things TokensThe Gnosis Dutch Exchange #3
Having introduced the Gnosis Dutch Exchange (DutchX) and explained its mechanism design, we’d like to provide you with more details about the exchange in a series of bi-weekly posts. We hope this series will shed light on the exchange’s features and leave you not only well prepared for the DutchX launch (planned for start of Q2), but also ready to participate.
This week, we’d like to run through all things tokens.
Trading Tokens on the Gnosis DutchXThe written smart contract for the Gnosis DutchX is compatible with any ERC20 token. When we talk about a particular auction, we mean any token-pairing, i.e. Token A is being “sold” (auctioned off; sellToken) and Token B is the token used to buy Token A (buyToken). Auctions for any token-pairing run independently from one another.
Fiat currencies as well as crypto-currencies that aren’t ERC20 compatible (i.e. ETH) will not be tradable on the DutchX. Hence, users need to hold WETH (“wrapped ETH”) to be able to trade ETH for other ERC20 tokens.
Anyone is able to list ERC20-compatible tokens following a standardized process, as explained in detail below.
Listing TokensLet’s assume you’d like to trade the Y Token which is not yet listed on the DutchX. If you’d like to introduce the Y Token to the exchange, you will first have to list the WETH/Y Token pairing. To do so, WETH will be the token auctioned off (sellToken) and the Y Token will be the token bought (buyToken).
For the WETH/Y Token pairing to be listed, you will have to fund the auction with at least $10,000 worth of ETH as sellTokens. You will also have to set a price for the WETH/Y Token pairing as we will start the auction at twice that chosen price. The auction will start 6 hours after the conditions for the token listing are met.
When setting the price, you’re incentivized to choose the real market price. If you quote a higher price than the market price, you increase the running time of the auction — other than that, this strategy won’t have an impact. If you quote a lower price than half the market price, the auction will start running at below market value and hence also clear below value, resulting in you selling your initial ETH funding at a loss. If the price you quoted is marginally too low, you simply decrease the running time of the auction.
Initiating any particular Token-PairingAfter the new Y Token has been listed using WETH, every specific Y Token-pairing to be traded will have to be initiated separately. To ensure that there is sufficient trading volume, this initial listing will have to be funded with the equivalent of at least $10,000 worth of ETH. For example, if you’d like to trade the Y/A token-pairing, and A as well as Y are already listed on the DutchX, you will have to initiate this particular Y/A token-pairing by funding the auctions Y/A or A/Y with at least $10,000 worth of sellVolume combined. You will not have to set a price — we calculate the price based on the A/ETH and Y/ETH rates on the DutchX.
https://blog.gnosis.pm/on-all-things-tokens-1fd977184649