How SecretSwap works

Welcome to this post, where we are going to see how secretswap works, the main swap of the Secret network.

Secretswap is the most liquid and most used swap in this network, which is characterized by its privacy in transactions, and being a totally private blockchain, unlike most of the ones that exist today. Therefore, having this privacy factor, there are some different aspects to the classic swap that we can find in other networks such as Ethereum with uniswap or pancakeswap in the binance Smart chain. Although the operation is very similar, there are some steps you must do to be able to use secretswap and other applications of this network.

If you have never used the secret network, this guide will help you understand how it works. And even if you have secret in your staking wallet, it is somewhat different to use this network with applications like a DEX, such as secretswap.

What is SecretSwap

SecretSwap is a liquidity protocol for automated market makers (AMM). There is no order book, no centralized party, and no central trade facilitator. Built by Secret Contracts, SecretSwap transaction inputs are encrypted – protecting users from front-end attacks and providing a higher level of privacy compared to traditional AMMs.

Each pool within SecretSwap is defined by a secret contract that includes some functionality to enable token exchange, add liquidity and more. At its core, each pool uses the function x*y=k to maintain a curve along which exchanges can occur.

The pools keep track of reserves (liquidity) and update them each time someone trades. Since reserves are automatically rebalanced, you can always use a SecretSwap pool to buy or sell a token without having to have a counterparty on the other side of the trade.

As you can see, it’s a traditional decentralized swap, but with the privacy feature that this network adds. So let’s see what you need to know to use secretswap with maximum privacy.

SSCRT

First of all, we will use keplr wallet as it is the most used wallet and the one I personally use. Here, you can find the secret network and send secret to your wallet from exchanges like Binance.

Once you have Secret (SCRT) in your wallet, you can delegate it to validators to get staking rewards. Although you can find more details on this in our keplr guide, the important thing we found is Secret SCRT or sSCRT.

It is an option that you will see in your keplr wallet when you go to the secret network, and that you will not find in other networks. sSCRT is the Secret token (SCRT) but with more privacy, that this network has with its Smart contracts. So if you want to use tokens with more privacy, I recommend you to pass your SCRT to sSCRT always leaving an amount of SCRT to pay for the commissions. Since each transaction you will have to use SCRT to pay the gas fees and you can’t use it with sSCRT.

To get sSCRT is really simple. Just click on Secret SCRT in keplr, in convert select from SCRT to Secret SCRT, the amount and click on convert. Confirm the transaction and you are done. You will see the amount you have converted at the top of your sSCRT balance.

Although you can use normal SCRT without converting it to sSCRT in secretswap, I understand that if you use this network it is because of the privacy it adds compared to other networks, and therefore, you will probably want to convert your SCRTs to sSCRT before making any transaction.

With sSCRT we are ready to use secretswap with total privacy.

Swap

The first and foremost thing we find is the swap. Here, we will be able to swap Secret’s network tokens for others. And we can use both sSCRT and SCRT. You can see some different aspects than the classic swap, mainly above each token, a view balance message.

As mentioned, the secret network is known for its privacy, so you cannot see how many tokens you have without first signing a transaction. To do this, click on view balance, keplr will open to add the token and click submit. Click approve to confirm the transaction and you will be able to see the balance of that token.

With the balance accessible, simply indicate the two tokens you want to exchange. You don’t even need to see the balance you have of the token you want to get, because in to, you can see the amount you will receive for that amount. Here, we indicate the two tokens, for example, sSCRT and SHD and the amount. Now just click on swap, confirm the transaction in your wallet and you will get the other token. In this case, SHD.

In route you can see the changes made by the platform to move from one cryptocurrency to another. Usually, the more jumps, that is, the more cryptocurrencies you see in route, the more fluctuations and less accuracy in the prices. But this is if you use large amounts. If this is not the case, you will hardly notice it. Below you can always see the minimum you will receive, the price impact, in this example is only 0.01%, so you will not notice any difference even though it is a multi-step route.

Pool and Earn

In pool we find the classic format to create and undo LP Tokens, and provide liquidity to secretswap. Although we will not go into much detail, since the operation is the same as any LP in other DEX such as uniswap or pancakeswap. If you do not know how to create an LP Token to provide liquidity and receive rewards, you can find more information on our page about this topic.

In earn you will find the different options for farming with LP tokens. The most important is to see the TVL or total locked value to see the amount and its dollar value in each pool. Also, we find the APR, which is the percentage that we will receive annually for providing liquidity to the protocol.

You can also find here the staking of the swap cryptocurrency itself, SEFI. At the moment, it is 16% APR. In some pools, you will see a multipler, which are incentives that the platform launches to certain pools to encourage users to contribute liquidity in them. Even if you see for example a 10x, this multiplier is already added to the APR of the pool. So you should not think that you will receive for example the APR and a 10x of that APR. This is important to keep in mind, because if there is no longer the multiplier, the annual % of that pool will decrease, because currently that % is due to the multiplier incentives.

To deposit once you have created the LP with the same proportion of both tokens, for example in sSCRT and SEFI, click on that pool and it will be displayed. In earn, we must deposit the LP. Here, first we must click on view balance and do the same process that we have commented in the swap. Once done, we can deposit the LP tokens in earn, indicating the amount and clicking on earn, confirm the transaction in your wallet and that’s it. You will have your LP tokens generating the annual % that you can see in APR.

If you are new or with little experience providing liquidity to protocols, mention that the APR can and usually vary quite a lot, so do not expect to always get that annual %, especially when it is very high. Also consider the possible losses if the token drops in price or the impermament loss in case the prices vary a lot. If any of these words are unfamiliar to you, first look for information before placing a relevant amount of money and then find out about aspects you did not know about.

Governance

Finally, in governance you will be able to vote on new proposals if you have the platform token in staking SEFI and be part of the platform by contributing with your vote. It works in the same way as most of the platforms that have their token and the users who staking this, can vote on new proposals or submit a proposal to modify certain aspects of the platform.

I hope it has helped you to know in more detail how secretswap works and the most relevant aspects of this DEX. Remember that if you don’t have an account with binance, you can create one just below.