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The market prices of crypto and DeFi tokens change very quickly, which allows the occurrence of slippage. Let me introduce you to "slippage" if you are hearing this term for the first time. There is often a difference between the price at which a trade is executed and the price at which it was expected to trade. This difference is called slippage.
Although it can occur at any time, it is predominant in the case of the high volatility of a token. Slippage is often considered bad because people don't want any difference between a trade's expected and executed price. Keeping this in view, Saddle Finance has launched virtual swaps, where users can have access to the low slippage trades.
Bandits! We’ve added virtual swaps to our app (it’s @quantstamp approved)! Using @synthetix_io synths, users will have access to low slippage trades across our pools supporting $sBTC, $sETH, and $sUSD.
Users can access low slippage trades with Virtual swaps using Synthetix’s synths. Synths can act as a common asset while bridging ETH, BTC and USD pools. It acts as a liquid bridge between any pool containing sETH, sBTC and sUSD because it can be exchanged with infinite liquidity.
The saddle has three liquidity pools to support sUSD, sETH and sBTC synths. So, users can easily swap between any assets in these pools.
You can use this to access the saddle liquidity pools https://saddle.exchange/#/pools.
Let’s suppose you want to swap from sETH to sBTC. Note that you can also swap other available tokens, but we are considering one example here to understand how you can swap using virtual swaps.
Note that you will need to set the Max Slippage equal to or more than 0.5%, else your transaction might fail. It is required because the prices may fluctuate during the waiting period.
First of all, you must know that each synth is actually collateralized by more value than it represents. Also, if you own one sETH, it doesn’t mean that you own 1 Ethereum; instead, you will only have exposure to the ETH price.
When you trade using synths, you actually swap the debt from one form to the other at the current market price. It is because you are swapping sBTC to sUSD and not BTC to USD, and the on-chain oracles provide the price information for the derivate tokens.
Now, Synthetix has introduced a waiting period to overcome the front running. So, the trader has to wait before he gets the underlying asset. During the waiting period, the oracle can check the price difference if there. After the expiry of the waiting period, the price difference is calculated.
Now, if the updated price is higher than the executed price, then the difference is reclaimed, and if the updated price is lower than the executed price, then a rebate is given.
The saddle team is determined to help users by eliminating the time to retrieve funds and allowing the integration with aggregators. The team is working on V2 virtual swaps, which is an improved version to support atomic settlement.