gm Steppers and its time again for todays update blog. Another busy month behind the scenes here at Step HQ with work pushing ahead on our Q2 goals, there’s a few big ticket items remaining on that list including referrals and the first products for our historical data indexing work. Lets have a short recap on what’s been going on
Integrations, bug fixing and UX updates
We recently added support for the 01.xyz perps exchange, Cykura, Crema aswell as Orca whirlpools, TULIP staking and various fixes and improvements to Transaction History and and pool support. We have a few more integrations we are considering and that should cap off coverage for a while most likely. We don’t see as many protocols launching at the ferocious pace of 6 months ago which frees up some of our team to focus on the other areas of the app to our delight.
One of those areas is a UX overhaul, you’re going to really like what you see, this simplification will also make development quicker going forward as we standardise a lot of the areas we had to smash out quickly in the past and cleanup redundant blocks of code.
Sunsetting of the Step AMM and Farms
The Step AMM was born out of a time on Solana a year ago where there were 2 AMMs- Raydium and Orca. Serum had just deprecated their xyk AMM and the goal for the Step AMM was to:
- Provide a liquidity sink for STEP token holders
- Add a steady revenue source for the protocol
- Be a base to build further additions to like our Farm creator
In all those respects, it has achieved success and done surprisingly well.
We never set out to be ‘an AMM’, that wasn’t our core product and our xyk AMM was more of an addition to the space than something we wanted to focus on pushing. In the AMM world its a race to the bottom in terms of fees and dilutive emissions whereby the only way to battle it out for liquidity is to pay people to use your product, constantly being NET negative in protocol value over time by spewing out new emissions which get dumped for yield. This is a self destructive game to play as it destroys token value in the hopes that LPs will stick around after the free money winds down but in reality they all just move onto the next high apy AMM, wasting all those millions you spent trying to keep them here, and for what? We could absolutely have opened it up to non-step tied pairs and added a mountain of emissions and discussed this many times but this would have been very detrimental to the protocol over time.
Many teams and projects did see value in our farm creator however, they added their token yield farms in a totally permissionless manner, which was the original design intent and were delighted to see that. We did however incentivise our own farms periodically from money from treasury which was a very expensive endeavour, usually 20k per month per pair (this is money we had in treasury, not new circ supply). We did this to ensure a healthy liquidity sink for STEP and for the most part we would attract 600–700k TVL for the top STEP denominated pairs at a cost of 20k.
However as time went on it became clear that we were moving toward the ‘data infrastructure provider’ direction and not engaging in on-chain financial games which, as you can see from the market in general at the moment, perform very poorly in macro bear markets. With the launch of Jupiter as an aggregator focused on balancing swaps between AMMs, it also became less reasonable for us to force Step AMM only swaps in our app (which resulted in a worse price for swappers) and instead open it up to a Jup integration which gave our users access to the best price from all of Solana. This devalued the need for the AMM moreso as swaps are now incentivised by way of Reward Options on any Step originated Jup swap- even if the swap executed on non-step pools.
Given the rise of Concentrated Liquidity AMMs which we predicted at the start of the year would be 95% market share by years end, it was clear the days of XYK AMMs were numbered. UNIV3 is a testament to this as its now vastly larger than the V2 version which is simpler, more composable and has an existing mindshare. In order to keep the AMM relevant we would need to launch a Step V2 using one of the open source CLMM contracts. However this wasn’t good enough in and of itself, not only would it require an entire frontend rebuild but we would also need to build vaults for users as just like options vault protocols, UNIV3 style CLMMs are too complex to get significant user traction at this stage and by making vaults it would mean we would take custodial control over user funds and adjust/balance when the vault went out of price range. All significant security and price risks.
Given all this, it didn’t make much sense devoting months of devtime to do this when it wasn’t even a core part of our product and would prevent us from doing other things like progressing on data indexing work, integrations and app performance. If our only job was being an AMM sure, but its not.
We are therefore sunsetting the Step AMM over time, we won’t be renewing the farm pools we incentivise and we will be slowly de-emphasizing it within the app, starting with blocking deposit only functionality for LPs and enabling users to only withdraw LPs- much like Serum did. This will be a long process to inform users to remove their liquidity and will need to stick around in the app via some links for a while.
New STEP Liquidity Sinks!
Given a large STEP liquidity sink will be being deprecated with the Step AMM soon its important there are other, even better liquidity sinks and we are excited that the ecosystem is a lot more developed than where we were a year ago when the AMM started, there is a multitude of options available:
- xSTEP staking
- Friktion STEP covered call vaults
- Solend Step Lending pool
- Larix Step Lending pool
- Acumen Step lending pool
- Orca Whirlpool STEP pools
- Raydium LP Step pool
- Cykura permissionless STEP pools
- a new sink and partner coming very soon….
There are so many awesome liquidity sinks and ways to increase productivity for STEP token holders today and we will be highlighting these in the app, making it easy for users to enter and exit such pools from within Step. Of particular note are the concentrated liquidity pools which will provide much better onchain pricing for Step as well as generating APYs for LPs that are unsubsidised yet very substantial.
We think this is the most sensible path forward and will free up dev resources to focus on our core product- the Dashboard and Data. The revenue potential of this is far higher than that of the AMM so we are not concerned at all in this revenue stream reducing. You’ll be seeing the fruits of this direction change later in the year as we rollout more data focused products and we look forward to providing you even better insights in the Solana ecosystem!