FutureSwap – a permissionless DEX offering 20x leverage – has ended it’s Alpha early after experiencing exponential growth in its first 3 days of going live.

As one of the more talked about projects in leading DeFi circles, FutureSwap was able to aggregate roughly $1.5M in liquidity alongside roughly $17M in trading volume in the 72 hours it was available to the public. To give some context as to these figures:

“Within three days of launch, traders made Futureswap the largest DEX by daily volume with growth trending at 130% per day. This volume translated into the outperformance of holding equal value amounts of ETH/DAI for liquidity providers of over 550% annually.”

Here’s a great chart better explaining the growth:

Why Close?

In an era when DeFi projects are frequently getting in over their heads, it’s refreshing to see FutureSwap pump the breaks before things got out of hand. I mean, 550% annual return for liquidity providers is by far the highest DeFi return we’ve seen – and we can only assume this rate got to be so high due to extreme demand (and thus high counterparty risk) that comes with it.

Whereas many projects would have just chugged along and waited for the worst to happen, FutureSwap was instead able to use this trial to aggregate loads of valuable user insights, all while proving that there is clear (and in some regards limitless) demand for permissionless 20x leverage on Ethereum-based assets.

Since announcing the shutdown, FutureSwap has urged traders to cease creating new market pairs, largely by increasing the fees associated with doing so to the point that it became more costly to start a trade than to actually profit from it. On the LP side of things, the once 550% annualized return was dropped to 0% – essentially giving people no reason to keep their money in the protocol. As stated from the original post:

  • Step 1: We first communicated what we were doing and how this would affect users.
  • Step 2: Raised fees to make using the platform unsustainable.
  • Step 3: Disabled opening new positions.
  • Step 4: Turned off the exchange.

For those who were providing liquidity, they were also probably aware of the FST rewards – FutureSwaps native governance token  – that come with doing so. Despite the exchange being stopped prior to the 7-day minimum vesting requirement to earn these rewards, the team has vocalized that they will be allowing LPs to claim their pro-rata rewards which will become useful upon the full relaunch in the coming months.

The Power of an Off Switch

While many are quick to criticize DeFi projects with an admin key, perhaps this situation can serve as a silver lining of the proper way to slowly shut down a product, especially if it’s starting to snowball beyond initial expectations. It’s important to note that this shutdown does not go to say the FutureSwap team was incapable of handling the growth, rather that they personally felt this growth required more management on the product side to protect their users.

Most importantly, the way the exchange was shut down provided an easy and intuitive way for those using the platform to exit in a seamless fashion. Whereas the exchange could have said “exit all liquidity in 24 hours or lose it”, their choice to slowly wind down and encourage people to withdraw (rather than forcing or not allowing it) goes to show this project is one worth keeping an eye on in future months.

In the meantime, the best way to stay up on what’s going on under the hood is by joining the official Discord and joining the conversation.

Until then, we’ll be keeping a close eye on their official Twitter account for any new updates regarding the relaunch.