Tinyman: The First DEX on Algorand

By 2sats | 2sats | 11 Oct 2021


*obligatory not financial advice*

 

What is Tinyman?

Tinyman is a decentralized exchange, like Uniswap, that launched on the Algorand mainnet earlier this week. With Tinyman it is finally possible to instantly swap ALGO and Algorand tokens in a decentralized way.

Many DEXes on Ethereum are almost unusable for normal people because thanks to the insane gas fees on Ethereum its only profitable to use if you are trading huge amounts of money. Algorand doesn't have that problem, its gas fees are insignificant. Because of that Tinyman is very cheap to use and doesn't burn a hole in your pocket. Tinyman is a DEX for the little guy.

Tinyman works like any other DEX, it uses liquidity pools for its Automated Market Maker (AMM) to build a price for its tokens. Basically there are pools that hold 2 assets with an equal total value. For example, if you have a pool with 10 ALGO and 10,000 YLDL, then Tinyman would let you buy 1 ALGO for 1,000 YLDL. If there is 9 ALGO and 11,000 YLDY in the pool then you can buy 1 ALGO for 1,222 YLDL. This only works if the pools have enough liquidity, so traders need to pay a swapping fee that is being distributed to liquidity providers.

 

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Why should you care about Tinyman?

It makes zero sense for a decentralized network to depend on centralized exchanges for trading, so this is a milestone for the entire Algorand ecosystem. Of course you would likely still need a centralized exchange to buy ALGO before you can use the DEX, but its still a huge step for decentralization.

Liquidity providers have a risk of impermanent loss, so they should pick a trading pair that will likely grow together like ALGO and YLDY, but they can earn a lot of money from the swapping fees. Since there is no competition and the trading is very cheap there will likely be a lot of action on the DEX.

Tinyman has first mover advantage on Aglorand and its governance token that will launch in Q1 of 2022 will likely have a lot of value. This TINY token will likely be distributed to liquidity providers as a further incentive, much like other DEXes are doing it. Or it could also be airdropped to early users like Uniswap did it with UNI.

 If you have a bag of ALGO and you want to buy Algorand tokens you should try Tinyman, maybe you will receive an airdrop in a few months that way. Keep it on your watch list, its future governance token will likely be a big deal on the Algorand network.

 

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