About Trader Joe

Trader Joe is a decentralized one-stop trading platform offering decentralized financial services such as Swap exchanges, staking, liquidity mining, and more. It also integrates an NFT marketplace. Noteworthy is its unique combination of a DEX (Decentralized Exchange) with leverage trading, which helps promote liquidity and attract more capital.

Trader Joe now supports networks including Avalanche, Arbitrum, BNB Chain, and Ethereum, achieving cross-chain functionality and attracting new users and capital. Besides supporting all functions of a DEX, Trader Joe allows users to provide liquidity by participating in a yield farm, earning the native token $JOE as a reward. After staking $JOE, users can use it to vote on governance proposals.

Project Background

Trader Joe was founded in 2021 by developers OxMurloc (pseudonym) and Cryptofish, securing strategic funding of $5 million. It received support from major capital institutions and funds, including Three Arrows Capital, Mechanism Capital, Avalanche Foundation, Coin98 Ventures, DeFiance Capital, GBV Capital, Not3Lau Capital, and Aave founder Stani Kulechov.

Trader Joe’s Operating Mechanism

Trader Joe consists of several core functions: interaction, staking, cross-chain, mining, lending, and an NFT market called Joepegs. Unlike other cryptocurrency exchanges, Trader Joe’s platform is fully decentralized, meaning it operates without any central authority. Users of the exchange do not need to deposit cryptocurrencies into Trader Joe; they simply conduct wallet-to-wallet transactions. Additionally, the liquidity order book feature launched in its V2 version has drawn market attention.

According to the latest data from Defilama, Trader Joe’s total value locked (TVL) has exceeded $100 million, with the DEX component accounting for 30%.

Trader Joe Data (Source: Defillama)

Liquidity Order Book

The liquidity order book in Trader Joe V2 significantly enhances capital efficiency and reduces trading slippage. It innovates from the concept of concentrated liquidity, inspired by Uniswap V3. The major difference from Uniswap lies in Trader Joe’s bin pricing mechanism.

In Trader Joe, liquidity is discretized into fixed, equally wide bins with a set price in each bin, whereas Uniswap V3 concentrates liquidity within a continuous curve in a fixed range.

Through the Liquidity Book (LB), liquidity providers (LPs) can offer liquidity within a chosen price range, known as concentrated liquidity. For instance, with the USDC/USDT pair, if an LP opts to provide liquidity between $0.99 and $1.01, it will earn trading fees as long as the price remains within this range.

The method of aggregating liquidity in LB is also different from Uniswap V3. In LB, liquidity is vertically aggregated across each bin, whereas in Uniswap V3, liquidity is horizontally aggregated. The main advantage of vertical aggregation is that it allows liquidity to be interchangeable.

Comparison of Liquidity Aggregation Methods between Uniswap and LB (Source: Trader Joe Documentation)

Bin Pricing Mechanism

A bin represents a price range unit in the liquidity book system. The liquidity book allows liquidity distribution across price ranges with fixed widths, enabling trades at a set price within each bin. Each bin signifies a price point, and the difference between two consecutive bins is the bin step. The Bin step for each trading pair’s Pool is a parameter that the creator can set, allowing for different Bin step Pools for the same trading pair.

Moreover, it includes the addition of single-point liquidity, equivalent to placing a Maker order in the order book. Essentially, the price difference above and below any point is 0.2%, based on proportion rather than a fixed value.

For example, using USDC/USDT, if the current price is $1 and the bin step is one basis point (0.0001 or 0.01%), the next consecutive bin would be calculated as follows: $1 1.0001 = $1.0001. Subsequent bins would be $1.0001 1.0001 = $1.00020001, and so on. This forms a geometric sequence where the common ratio is 1.0001 raised to the power of ‘n’.

Lending Platform (also known as Banker Joe)

Banker Joe, the lending protocol of Trader Joe, provides lending services for whitelisted assets, enabling users to deploy flexible investment strategies on the fast, low-cost Avalanche network. Users can earn interest by lending out tokens or choose to take out collateralized loans, creating leverage with their existing investments.

Asset Services

Users deposit one of the whitelisted tokens on the loan page, in return, the Trader Joe platform provides a receipt, such as: when a user deposits AVAX, they receive jAVAX as a return. The interest increases over time (similar to the working mechanism of xJOE). When users return the jAVAX receipt to Banker Joe, they receive the original AVAX plus additional earned AVAX token rewards.

Loan Services

Users can use these assets as collateral for loans. For example, a borrower can provide ETH to the jETH contract, and then borrow AVAX from the jAVAX contract. The amount of AVAX that a borrower can borrow is determined by the collateral coefficient of ETH. For instance, if a borrower provides 1 ETH as collateral and the collateral coefficient for ETH is 65%, they can borrow AVAX worth 0.65 ETH. The protocol includes security measures to limit actions that could lead to exceeding the borrowing limit (such as borrowing more tokens or withdrawing collateral).

Repayment Services

Borrowers can repay tokens to Banker Joe, up to the amount borrowed. If repaid partially, the remaining loan balance may not be zero and will continue to accrue interest. Repayment involves transferring tokens from the borrower back to the token market.

It is important to note that the official Trader Joe has explicitly stated that the lending services provided by Banker Joe are risky. Borrowers face the risk of liquidation, which may result in lenders being unable to withdraw their deposits.

$JOE Token Economic Model

$JOE is the native token of Trader Joe, with no pre-sale, private sale, or pre-market distribution. It follows a diminishing issuance model over a period of 3 years from its issuance, with monthly reductions. The total supply is 500 million tokens, of which 10 million are permanently locked.

Distribution Ratio of $JOE Tokens

• 50% for liquidity incentives
• 20% for the community treasury
• 20% for the development team (with a 3-month lock-up period)
• 10% for strategic investors (with a 3-month lock-up period)

$JOE Distribution Chart (Source: https://support.traderjoexyz.com/en/articles/)

$JOE Diminishing Plan

$JOE’s diminishing issuance model is set for a 3-year period from its issuance, after which Trader Joe will have sufficient funds to continue supporting the sustainable growth of the Trader Joe ecosystem. This includes supporting initiatives like the liquidity book reward program and other potential methods to enhance the entire Trader Joe ecosystem.

JOE Unlocking and Distribution Plan Chart (Source: https://support.traderjoexyz.com/en/articles/)

Common Use Cases of $JOE

As the governance token of Trader Joe, staking $JOE grants voting rights in Trader DAO proposals. Users can stake $JOE to convert it into xJOE and earn platform transaction fee dividends. Every transaction on Trader Joe incurs a 0.05% fee, which is added to the xJOE pool. $JOE can also be used as collateral in lending protocols.

How to Purchase $JOE

To acquire $JOE tokens, you can buy them through cryptocurrency exchanges. For instance, the well-reputed Gate.io exchange supports the purchase of $JOE. Simply create a Gate.io account, complete the KYC process, deposit funds into your account, and then you can directly purchase $JOE tokens.

Conclusion

With increasing regulation of leverage in centralized markets, the trend of capital flowing toward platforms like Trader Joe that support leveraged trading is inevitable. Besides its core feature, the Liquidity Book, Trader Joe is actively venturing into the NFT market and developing a one-stop service DeFi ecosystem across multiple chains. In the future, Trader Joe is expected to continue launching new chains and deploying on layer-2 network chains, attracting more funds and users to participate in ecosystem development.

Furthermore, Trader Joe’s focus on decentralized market construction aligns with one of the main objectives of DeFi’s forward development. The future for Trader Joe looks bright, and its native token, JOE, is highly likely to achieve new heights in the next bull market.