Title: Introducing ERC-1919: A Revolutionary Mechanism on Base’s AIR
Degen is still Degen, but just a few days ago, Base’s AIR introduced a new mechanism called ERC-1919. So, what exactly is 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. This is the problem that AIR aims to solve. The concept of ERC-1919 is not difficult to grasp. In fact, I believe it is even simpler compared to the ordinary Uni V3 (or even Uni V2) pools. In other words, with ERC-1919, there is no need for a DEX and LPs to provide liquidity to the pool.
Instead of the traditional 50/50 LP model that determines prices based on supply and demand, they have adopted a multi-tiered mechanism. In this specific case, the price increases or decreases by a predetermined Delta value of 0.8% per tier.
The token quantities for each tier are predetermined in the contract. If there is a surge in demand, the price will rise and the ETH rewards will decrease accordingly. When the selling pressure outweighs the buying pressure, the price will fall back to the previous tier. If the buy or sell orders are too large for a single price level to handle, they will fill the nearest tier and then continue to escalate or fall back.
The advantage of this system is that you know what returns you will get from the system, and once you sell the tokens, their tier will decrease (and be destroyed).
I find the charm of this mechanism lies in its potential for various use cases in the future, such as improved Dutch auctions and tier-based token sales. Additionally, I have also noticed that this approach completely eliminates the issue of counterparty risk in trades (as developers cannot rug after launching LPs), which is pretty cool.
