How to play the first ERC-1919 Token, AIR on Base?

Original Author: 0x Jermo

Original translation: Peng Sun, Foresight News

Degen is Degen, but just a few days ago, a new mechanism called ERC-1919 was introduced on Base. So, what is this ERC-1919?

The problem with DEX trading is not necessarily a lack of liquidity, but also the risk of liquidity being maliciously attacked by anonymous developers.

AIR’s solution is to solve this problem. The concept of ERC-1919 is not difficult to understand. I even think that compared to ordinary Uni V3 (or even Uni V2) pools, it is simpler. In other words, if ERC-1919 is used, there is no need for a DEX, and therefore no need for LP to provide liquidity to the pool.

They do not use the traditional 50/50 LP mode to determine the price based on supply and demand, but adopt a multi-level grading mechanism. In this particular case, the price increases or decreases by a predetermined Delta value of 0.8% per grade.

The number of tokens in each tier has been pre-determined in the contract. If demand surges, the price will pump, and the ETH yield will relatively decrease. When the selling pressure exceeds the buying pressure, the price will fall back to the previous level. If the buy/sell order is too large and a single price level cannot handle it, it will fill the nearest tier and then continue to upgrade or fall back.

The benefit of this system is that you know what returns you will get from the system. Once you sell the tokens, their level will drop (and be destroyed).

I think the charm of this mechanism lies in its potential in various use cases in the future, such as improved Dutch Auctions, hierarchical node sales, etc. In addition, I also found that this approach completely eliminates the problem of counterparty risk (because developers cannot rug after launching LP), which is very cool.