SundaeSwap is a decentralized, autonomous protocol for trading cryptocurrencies, specifically Cardano tokens, on the Cardano blockchain. The SundaeSwap protocol is defined by a series of immutable, permissionless, and decentralized smart contracts built on Cardano using Plutus, the smart contract programming language of the Cardano blockchain. These smart contracts were built to allow users to trade cryptocurrencies directly with each other and without a third party intermediary that holds the power to halt trading or any other form of restriction. The SundaeSwap protocol has been designed to remain non-custodial, censorship-resistant, and secure.
This protocol has, since it's launch over a year ago, maintained extremely high availability, and has seen multiple other access points within the ecosystem, such as being included in the DEX aggregator on Meusliswap and the swap page on the Indigo Protocol. These are testaments to the robust and decentralized nature of the protocol.
How does the SundaeSwap protocol compare to a standard market?
To fully grasp how the SundaeSwap protocol compares to a traditional, centralized asset-trading market, it’s important to highlight two major differentiating factors: how an Automated Market Maker (AMM) works, and what do “decentralized” and “centralized” mean?
Generally, standard public markets use a central limit order book, where traders can create orders to buy or sell an asset that are organized sequentially by price, that are filled or unfilled as the demand of that asset either increases or decreases. If you have traded stocks through brokerages (i.e. Robinhood, Fidelity), you may have first-hand experience trading using an order-book system.
Conversely, the SundaeSwap protocol uses a different form of market making, called an Automated Market Maker (AMM). Instead of the more common buy and sell orders found in an order book system, an AMM creates a “liquidity pool” of two assets, where their respective values in the pool are more or less balanced. Users can help create the pool by providing a balanced amount of both assets into the pool. Once the pool exists, a trader submits a trade for one of the two assets in the pool, and as a result the price of both assets increases or decreases and a new market rate for both assets is calculated. Essentially, instead of filling a buy or sell order of another person, the trader is buying or selling directly within the pool.
Second, The SundaeSwap protocol works using a permissionless, decentralized system. This means that the protocol is available for open use, where there are no restrictions on who can use the protocol. As long as you have a Cardano wallet and internet access, you can add and remove liquidity from a pool and swap cryptocurrencies. This is unique from the centralized, permissioned system found in traditional finance where restrictions on users and transactions exist based on geographic location, geopolitical reasons, socioeconomic status, and age.
Note: Your use of the SundaeSwap protocol involves various significant risks, including, but not limited to financial loss due to the fluctuation of prices of tokens in a trading pair or liquidity pool. Although SundaeSwap Labs, Inc. developed much of the initial software code for the SundaeSwap protocol, it does not provide, own, or control the SundaeSwap protocol, which is a decentralized protocol run independently by smart contracts deployed on the Cardano blockchain. The protocol does not constitute an account by which SundaeSwap or any other third parties act as centralized financial intermediaries or custodians. For more information, see the SundaeSwap Disclaimer and Website Use Terms.