Integral SIZE <> SushiSwap, enabling users to swap with zero price impact via Sushi’s price oracle

[0xMitch]

Summary

Integral SIZE is a DeFi primitive providing infrastructure for large OTC orders. It allows traders to execute token swaps a t 30-minute time-weighted-average price (TWAP) with zero price impact relative to price oracles provided by DEXes such as Sushi. In fact, Integral SIZE’s CVX-ETH pool is currently using price oracle data from the CVX-ETH pool on Sushi!

Abstract

We would like to highlight the following areas for collaboration.

1. Trading on Integral SIZE. Sushi’s operations, treasury multisig, and community can trade USDC, ETH, CVX, and more tokens (in the near future) on Integral SIZE with zero price impact.

2. Listing SUSHI-ETH on Integral SIZE with the pool partially seeded by Sushi to allow large SUSHI transactions with zero price impact.

3. Adding a button on Sushi swap interface to allow traders with large orders to consider integral SIZE as an OTC venue (relying on Sushi price oracle and revenue sharing with Sushi treasury).

Motivation

We propose three areas for potential collaboration between integral SIZE and Sushi. Here are the details for each.

1. Trading on Integral SIZE.

• When Trading on large quantities, Sushi’s operations, treasury multisig, and community can save on fees and price impact by trading OTC-style on Integral SIZE with zero price impact.

• Price impact saving. Integral SIZE currently offers execution of USDC <> ETH and CVX <> ETH at 30 minute TWAP with zero price impact based on price oracles from Sushi.

• Fee saving. Use CVX-ETH transactions as an example below. The fee saving is less extreme for USDC-ETH swaps.
  -1 bp on Integral SIZE
  -30 bps on SushiSwap
  -1% on Uniswap v3

• In a live trade, someone sold ~$424k worth of CVX to ETH on SIZE, saving about 48bps ($2,049).

2. Listing SUSHI-ETH on Integral SIZE.

• People who want to transact SUSH tokens, especially in large quantities, would benefit from zero price impact trading on Integral SIZE.

• The execution will be done at 30-min TWAP based on the price oracle from the SUSHI-ETH pool on SushiSwap.

• Currently, a 10 ETH swap to SUSHI on SushiSwap would have a price impact of 47 bps. A 100 ETH swap to SUSHI on SushiSwap would have a price impact of 202 bps.
  
  

3. Adding a button on Sushi’s swap interface.

• By adding a button (and the option) to route individual orders of large magnitude to Integral SIZE, Sushi, as a platform, would be able to prived the added benefit of zero price impact to its users. As a result, this would help Sushi better serve large traders and strengthen its position as a comprehensive DeFi platform for trading, farming, lending, launching, etc.

Specification

Further, Sushis operations, treasury multisig, and community can interact with Integral SIZE within Gnosis Safe App Details here.

More about Integral SIZE
Integral SIZE is a decentralized excchange built for large trades of ERC-20 tokens. It allows trades to be executed at 30-minute TWAP with zero price impact (Announcement, white paper).

Key features:

• For Traders: Zero price impact of large trades (including less liquid tokens).

• For LPs: passive accrual of yield while achieving mean zero IL.

• Rely on an external price oracle (such as SushiSwap) for price discovery over time.

Twitter: @IntegralHQ
Latest Blog: Myth or Reality: Zero Price Impact Trading in DeFi
Documentation: Integral SIZE - Integral SIZE
Discord: https://bit.ly/3vFGihK

For

Integral lists a SUSHI-ETH pool on SIZE to allow large sushi transactions with 0 price impact. Add a button on Sushiswap interface to allow traders with large orders to facilitate SIZE as an OTC venue (relying on Sushi price oracle and revenue sharing with Sushi Treasury)

Against

I like things as they are.

Poll

• FOR: This looks interesting. Lets explore more.
• AGAINST: I like things as they are.

[pocketsquare]

Ill check the white paper but perhaps you can quickly explain to me how executing TWAP has “zero price impact” which I counted no less than 11 times in there so Im excited to see how this is achieved, because TWAP most definitely can still have impact

[Skipper]

I cannot post links here but please visit our integral Size doc pages on price impact for a deeper understanding.

Integral SIZE mitigates and minimizes price impacts on large orders by executing at a time-weighted-average price. Once the order is submitted, it will wait in the smart contract for 30 minutes before interacting with the pool. During this time, the protocol will pick up price information from the Uniswap V2 oracle and calculate TWAP. After 30 minutes elapses, the protocol will execute the whole order at TWAP.

[pocketsquare]

Where does the “delay” come from? And who is selling all that volume to the outsized buyer

[0xMitch]

“Delay” is the time elapsed from the moment an order is submitted and the moment when it has been executed. It’s essentially the 30-min TWAP duration and the time it takes for txns to be mined. Note that the current pools have a 30-min TWAP duration (delay) but the SC is flexible enough for an arbitrary duration.

The volume comes from the liquidity pools contributed by LPs. Because Integral SIZE adjusts its internal price state lazily (via an external price oracle) without the requirement of trading to convey price updates, the design mechanism eliminates the systemic role of arbitrageurs’ profit in typical AMMs, and its resulting impermanent loss on LPs. As a result, LPs on Integral SIZE would not be harmed by adverse flows and on average enjoys mean-zero ILs.

[stack]

Sushi at one time was the preferred AMM for whales simply because the main trading pools were the largest. With that no longer the case, slippage has become a significant issue for large traders. We need to innovate and explore liquidity/depth solutions, regardless of whether or not this is the way.

[fig]

I’m interested in exploring more - but that does not mean a full endorsement.

What risks does this introduce to the AMM product?

It is clear the benefit this may provide to Sushi - a stronger UX and lower slippage for the end-user.

How are the assets and pairs currently supported (CVX, ETH, USDC, etc) decided? How does this list mature and grow over time? Can Sushi influence this list?

Question here - are you using your own oracle?

@0xMitch

price oracle

Finally, could you provide color to #3, allowing users to trade OTC via SIZE. What is the fee for this?

Apologies for all the questions, learning more here

[Tenzent]

Glad to see the Integral Team here, I personally am very intrigued by the concept but have some thoughts. As of right now this proposal creates a better experience for Traders but does not account for Sushi Liquidity Providers.Trades being routed through Integral via the Sushi UI would not touch Sushi Liquidity and would therefore siphon volume away from Sushi LPs which might consequently drop TVL in pools.

In my opinion for this to be a worthwhile endeavor Sushi should be given some sort of fee share that can be sent to it’s own liquidity pools the same way Market Makers pay for order flow.

I think the wider-facing question is if Sushi wants to offer best price then perhaps it’s better off becoming a DEX Aggregator.

[0xMitch]

Integral SIZE relies on external price oracles such as Uniswap and Sushiswap pools. SIZW does not have own its own oracle as SIZE is not designed for price discovery. It depends on the pair and liquidity of the pair on either Uniswap or Sushiswap. We also aim to work with other DAOs and list relevant tokens the community wants. If you have suggestions, please contact us!

[0xMitch]

The fees are extremely low now to encourage users to try out the product, and cost sharing and allocating fees to sushi can be can be arranged/discussed further down the road.

[Tenzent]

Perfect, could you maybe outline the future fee sharing structure as well as the current and when you plan to change the fees to the norm.

[Tenzent]

Had a chance to speak with the Integral Team - Looks like this would definetly be a good opportunity to add some value to the ecosystem. Here’s the details as to the current fee and future fees aswell as the share Sushi would take it.

[pocketsquare]

Id like to see

• TCA data supporting the “zero price impact” selling point (t+1/5/30 min reversion?)
• how much flow is integral currently supporting on a notional basis (daily, monthly, ytd)?
• what is the estimated man hours needed to integrate their offering
• what is their proposed fee share
• what other clients have they integrated with and what kind of flow increase did they see
• have they ever had any outages

[Sagitario]

I find the TWAP trading concept an interesting one and think it’s a good strategy for large volume traders. I also think it’s a strategy that would largely benefit the entire DeFi ecosystem if implemented well.

[0xMitch]

Dear SUSHI community

Thank you for having us introducing our proposals during last week’s community call. We are here to present some empirical evidence on the potential benefits Integral SIZE can bring to Sushi and Trident Concentrated Liquidity Pool, and follow-up thoughts on how we think SIZE can support SUSHI’s growth.

Price Improvement

We sampled pricing quotes of different order sizes for various pairs from Sushi on Ethereum Mainnnet. Data is also sampled for USDC-WETH pair from Uniswap v3 on Ethereum Mainnet (the closest approximation, but not the same as, Trident).

We define price impact as the percentage difference between two quotes retrieved from Sushiswap/Uniswap v3 around/at the same time. The first quote is based on an order of 1 USD. The additional quote is based on an order of the USD amount of 1K, 10K, 100K or 1 mil.

The following table shows the price impact of different pairs during the data sampling period (5/16/2022 08:00 - 14:00 UTC).

Each column refers to a percentile of the price impact. For instance, the median price impact of an order of $1,000,000 swap between SUSHI-ETH is 10.11%. The 5th percentile value is 10.27%.

We can also observe from the table that price impact is proportional to the TVL of a given pair. Given that USDC-ETH pool has the highest TVL, orders of the same size incur less price impact. Consistent with our prior belief, SIZE would benefit traders the most when trading altcoins in large quantities.

When someone tries to swap $1,000,000 USDC to ETH, assuming the median price impact saving, SIZE would save him $1,000,000 x 1.49% = $14.9K (more than half of a second-hand Toyota Camry!)

In traditional finance, very few traders would execute a trade which would incur a 5%-10% price impact. And we believe the next generation of DeFi must look to put execution on par with traditional finance.

According to this Flipside analysis (kudos to Tenzent for sharing), the number of Sushi whales is growing. We believe there will be more whales joining SUSHI’s ecosystem with the recent 2.0 plan. With zero price impact relative to 30-min TWAP execution, we believe Integral SIZE is fully capable of providing whale traders from SUSHI community with a better price for their large trades.

Space to Grow

More importantly, we believe this partnership will create more growth opportunity for Sushiswap.

Sushiswap has built a big reputation among retail/degen audience. However, when it comes to whales and DAOs, Sushiswap is not often their first choice.

On-chain analytics show that, although Sushiswap is serving ~$50-100mil volume everyday, only $3-6mil volume (excluding MEV) comes from orders that are bigger than $100k. When it comes to average order size, Sushiswap is lower than most aggregators and Uniswap.

SIZE’s unique design and its saving on price impact would further empower and help Sushi better serve whales who trade big. This can be especially important under the current market conditions.

Towards a Better Future

Exactly five years ago, Vitalik Buterin discussed the merits and robustness properties of what we now know as Automated Market Makers (AMMs). In Q2 2022, two big predictions about (1) price discovery and (2) arbitrage profits, have been definitively validated by AMMs such as Sushiswap, and the rise of Miner Extractable Value (MEV), respectively.

A couple of 2017 Vitalik’s predictions for liquidity on-chain are yet-to-be realized. One of the most important prediction is that AMM would likely be inefficient for fulfilling large trades, hence specialized venues for large trades will arise.

By integrating Integral SIZE, we believe Sushiswap will not only be able to offer a better price for large trades from whales and DAOs, but continue its legacy and brand of AMM innovator.

Thank you for reading this far. If you would like to discuss more about this proposal with us, you can find us on telegram: https
://t.me/kamadod

[0xMitch]

Response to Pocketsquare

Hey @pocketsquare thank you so much for these questions! Here are our best answers at the moment.

TCA data supporting the “zero price impact” selling point (t+1/5/30 min reversion?)

We’ve put TCA analysis on T+30 in the last reply.

Not 100% sure what you meant by reversions? Do you mean by reversion as a result of prices falling out of the slippage tolerance range? If so, yes, the transaction will be reverted if the final 30-min TWAP price falls outside of the specified slippage tolerance.

How much flow is Integral currently supporting on a notional basis (daily, monthly, ytd)?

We launched Integral SIZE on March 22nd, 2022. After 6 weeks of operations, we have served ~$14mil of volume.

Our debut product, Integral FIVE was launched on March 27th, 2021, and it served ~$450mil in a year.

We’d like to point out that unlike other atomic DEX, SIZE does not have any MEV bot volume given its non-atomic nature. This helps mitigate traders’ risks for sandwich attack. or washtrading.

Just like large trades on Sushiswap, trades executed on Integral SIZE fluctuates heavily between days. To help you better understand our volume, here is the post-mortem analysis that documents our product usage between March 22nd 2022 and May 18th 2022.

• Trade
  • Volume for each pair
    • ETH-USDC: $12.7mil
    • ETH-CVX: $1.3mil
    • ETH-SUSHI: $0.26mil
  • Average order size: $94k
    • vs 1inch (100k), Uniswap (60k), Sushiswap (40k)
  • Maximum order: $2,109,877
  • 33% of the orders are > $50k
• User Profiling
  • 37.5% of the users used SIZE for more than once
  • Average wallet value of SIZE users: $896,760
  • Max wallet value of SIZE users: $28,900,025
  • 30% of the SIZE users have a >$100,000 wallet
  • 17.5% of the SIZE users have a >$250,000 wallet
  • 7.5% of the SIZE users have a >$1,000,000 wallet
  • 2% of the SIZE users have a >$10,000,000 wallet
    
    

What is the proposed fee share?

As limited-time offer, we are currently charge 1 bp trading fee to all trades (vs default 10bps). If the proposal for integration gets passed, we will revert the fee back to 10 bps, and share half of them with SUSHI treasury.

What other clients have you integrated with and what kind of flow increase did you see?

We are currently in talk with a number of DeFi projects for collaboration, but none has yet reached the height of integration. We chose Sushiswap because we see a strong synergy between us.

To put it more specifically, SIZE can bring to Sushiswap in terms of serving large trades and empower Sushi to be the one-stop shop solution for DeFi trading and lending, and Sushi can help Integral bootstrap this new primitive of “specialized venue for large trades” predicted by VB. When you think about the future development of DeFi, the element of “time”, “large trades”, “custom-made DEX” will be the resource of new blood.

What is the estimated man hours needed to integrate your offering?

There are two ways for this integration, and they cost different man hours.

• Option 1: Add a button and redirect SUSHI traders to Integral SIZE (referral model)
  • Integral will use a referral link to identify traders from SUSHI, then do the accounting via our backend
  • Relatively light lift ~2-3 days of work (Integral), couple of hours for Sushi’s dev.
• Option 2: The user can interact with SIZE’s pool directly (through a switch) on Sushiswap’s swap box (aggregator model)
  • If Sushiswap has all the data for creating a swap already and SIZE just needs to process the trade, then Sushi’s devs can use our SDK to generate the txn and have the user sign from Sushiswap.
    • If it’s just sending the txn from Sushi, then it should be a pretty easy integration. If we want to show more information then it could be more difficult.
  • This path would take longer (several days to weeks) but can be very fruitful in the long run. We would like to work with the dev team from Sushi to explore and work together on building a high quality solution.

Have you ever had any outages?

No outage or SC down time since the inception of Integral’s first product (March 2021).

[pocketsquare]

@0xMitch

TCA data supporting the “zero price impact” selling point (t+1/5/30 min reversion?)

We’ve put TCA analysis on T+30 in the last reply.

Not 100% sure what you meant by reversions? Do you mean by reversion as a result of prices falling out of the slippage tolerance range? If so, yes, the transaction will be reverted if the final 30-min TWAP price falls outside of the specified slippage tolerance.

Reversion is a price-impact measure in transaction cost analysis which measures the ‘reversion’ of the price, on average, post completion of an order, measured in regular intervals (t+5 minutes, t+30 minutes, t+1 hour, etc). If you see, on average, with a large sample set that a price moves against you x-basis points you assume that is due to your price impact (ie how much you moved the market price to complete your trade in the market - more aggressive trading = higher price impact). The takeaway from that metric is thus either A) you need to change your trading behavior and be more passive or B) you are getting picked off in the venue that you are using. Nuanced stuff but I would consider what you are measuring as ‘slippage’ ie the estimated execution price difference vs the current market price but i see what you are saying regardless.

Net-net, you guys have put through $14M of total volume so far over 6 weeks and I just am not sure A) this is a problem that needs solving and B) if we do need to solve it, that we need to outsource it to something that hasn’t been quite battle tested yet.

But to be clear I’m just 1 community member, not a team member, so if the team or other community members want to weigh in feel free.

[Aquaman]

I think implementing this proposal would very much benefit the community. Both traders and liquidity providers stand to benefit much.

[0xMitch]

TL;DR

A recent analysis of the Sushi Operations Multi-Sig Wallet has provided some insight for some potential savings for Sushi and traders doing similar large trades. Among a sample of 55 trades, about $66.0k worth of cost savings could potentially be accrued via trading on Integral SIZE.

We have proposed for Sushi to route individual orders of large magnitude to Integral SIZE. This would allow Sushi, as a platform, to provide the added benefit of zero price impact for its users. We highlighted this on the forum here, providing some data on price impact improvement and Sushi’s room to grow in regards to serving large orders.

We would like to further provide some insight on how Sushi’s operations can benefit from Integral SIZE. Upon a recent analysis of the Sushi Ops Multi-Sig Wallet,(0x19b3eb3af5d93b77a5619b047de0eed7115a19e7), we have noted some potential areas for savings.

Based on on-chain data, the wallet conducted a total of 2,137 transactions between September 24th 2021 and May 24th 2022 on ethereum mainnet. 101 of such transactions were categorized as “Trade” by zerion.io.

Subsequently, we limit the scope of such transactions to trades occurring on Sushiswap directly among $ETH, $SUSHI, $BIT, and $USDC, to which there were 55 transactions during the aforementioned period. We define the transaction cost for each transaction as the difference between the actual execution price and the price of swapping a small amount of the same tokens on Sushiswap.

Note that

1. The price of swapping a small amount of the same tokens is retrieved using Alchemy API with a specified block number which is the same as the actual transaction block number.
2. Sometimes the transaction cost can be slightly positive as the price of the small trade pulled assumes that the transaction happens at the end of the block.
3. There are different and potentially better ways to approximate transaction costs but we believe that this is one way to do so.

Among these 55 trades, the total transaction amount totaled $11.22 million, with the total transaction cost amounting to $66.0k. This cost expressed as a percentage of the total trade amount is roughly 59 bps. Much of the cost (the difference between a small notional trade and the actual trade) can be potentially attributed to price impact. Trading on Integral SIZE can help reduce the costs of these trades.

@Tenzent @pocketsquare @fig