Fusotao Protocol — Creating a new paradigm in DeFi
Source: Fusotao Website
In crypto trading, there are risks to using Centralized Exchanges (CEX) such as hacks and foregoing custody of your assets, while Decentralized Exchanges (DEX) present a different challenge of high transaction fees and low efficiency. Trading and investing in crypto thus carries risk regardless of which type of exchange you use. How then can we mitigate the risks of using a CEX and the drawbacks of using a DEX?
Fusotao Protocol is a verification protocol for an orderbook-based matching system, using the paradigm of “execute off-chain, verify on-chain”. Using Fusotao’s decentralized infrastructure, trust-free order book-based matching systems with zero-cost gas and low latency can be built. Through the method of off-chain matching, the process of order submission, order matching, certification generation and other processes runs on a centralized off-chain server, which enables traders to obtain the same fast and user-friendly trading experience as CEXs. And by using the method of on-chain verification, only when the transactions under the chain pass the verification on the chain, will the user’s assets on-chain be changed, thereby ensuring the security of the user’s assets.
This effectively keeps your assets safe as you do not need to transfer your assets to any exchange before the trade is executed. How this works is that instead of depositing tokens into the exchange, users of Fusotao need not transfer asset ownership, and the tokens authorized to the exchange will only move from free to reserved but will always be in the wallet. The exchanges of Fusotao must prove every user command using a Sparse Merkle Tree to update the assets on-chain.
Source: Fusotao Website
There are many other advantages to using the order-book based DEX by Fusotao. Not only will there be zero gas fees due to how orders are executed and proven off-chain, Fusotao also enjoys low latency, faster speeds, and most importantly, high security.
Fusotao will have its own native utility token named $TAO, which is the most important factor that motivates the proper function of the protocol. It also serves as the proof of community governance, development, transaction verification, and repurchase. Due to the nature of the protocol, most of the $TAO tokens will be generated by community mining and distributed to community members who maintain the operations of the protocol and carry out transactions. Based on published tokenomics, community rewards account for 63% of the total supply, of which transaction rewards account for 48%, verification rewards 7.5%, and staking rewards 7.5%.
There are various uses for $TAO, some examples include:
- Governance Token: $TAO holders can initiate upgrade proposals and suggest long-term initiatives. They can also vote on proposals.
- Gas Fee: $TAO tokens can be used to pay gas fees on the Fusotao Protocol application chain.
- Staking Fees: You can directly share transaction fees by staking $TAO for the DEXs backed by Fusotao Protocol.
- Trading Rewards: If you hold $TAO in the on-chain wallet and trade on the DEXs backed by the Fusotao Protocol, you can earn trading rewards.
With a grant from NEAR Foundation, Fusotao is in good shape to accelerate its development and grow its user base. Based on our understanding, Fusotao will launch its testnet at the end of February 2022, as well as FXDX, which is the first order book-based DEX in the NEAR ecosystem. The community can earn rewards by trading on FXDX or directly share transaction fees through staking tokens on the FXDX or other DEXs backed by Fusotao Protocol.
The IDO for Fusotao is expected to be in April 2022, with the mainnet launch also expected to happen around the same time.