🏆 3rd Place Winner - Uniswap Foundation Prize at EthGlobal NYC 2025
A custom parity pool that enables direct 1:1 ETH/stETH swaps with zero slippage, dynamic asymmetric fees, and sustainable incentives.
- StETH (mocked for 5% constant yield):
0x51aE19065794D01886f97A93E7DC5967940f2894 - ProtocolRevenue:
0x581E767fFF7136f57D33109BfB6121a01c7bc868 - RebasingParityPool:
0x522C190f46256270177F9aC6AF296319f157c888 - ParityLP:
0x8D5E57cf10877E42654d6a084b0511F4E94d0e5B - PoolManager:
0x1F98400000000000000000000000000000000004
graph TB
subgraph "Pool State"
ETH[ETH Balance]
STETH[stETH Balance]
EXCHANGE["1:1 Direct Exchange<br/>(Parity Pool)"]
end
subgraph "Trading Flow"
USER[User]
SWAP{Swap Direction?}
ETHSTETH[ETH → stETH<br/>0% Fee]
STETHETH[stETH → ETH<br/>Dynamic Fee]
FEE_CALC[Calculate Fee<br/>Based on Pool Ratio]
end
subgraph "Fee Distribution"
TOTAL_FEE[Total Fee Collected]
PROTOCOL[Protocol: 10%]
LPS[LPs: 90%]
INCENTIVE[Incentive Fund<br/>for Rebalancing]
end
subgraph "Rebasing Mechanics"
STETH_REBASE[stETH Auto-Rebase<br/>5% APY]
SHARES[Shares-Based<br/>Accounting]
YIELD[Preserve Yield<br/>for LPs]
end
USER --> SWAP
SWAP -->|ETH In| ETHSTETH
SWAP -->|stETH In| STETHETH
ETHSTETH --> ETH
STETHETH --> FEE_CALC
FEE_CALC --> STETH
FEE_CALC --> TOTAL_FEE
TOTAL_FEE --> PROTOCOL
TOTAL_FEE --> LPS
PROTOCOL --> INCENTIVE
INCENTIVE -->|Bonus stETH| ETHSTETH
STETH_REBASE --> SHARES
SHARES --> YIELD
YIELD --> LPS
%% Clean color scheme with readable text
style ETHSTETH fill:#90EE90,color:#000
style STETHETH fill:#FFB6C1,color:#000
style EXCHANGE fill:#FFD700,color:#000,stroke-width:2px
style INCENTIVE fill:#87CEEB,color:#000
sequenceDiagram
participant LP as Liquidity Provider
participant Pool as RebasingParityPool
participant LPToken as LP Token Contract
participant stETH as stETH Token
Note over LP,stETH: Adding Liquidity
LP->>Pool: addLiquidity(1000 ETH, 1000 stETH)
Pool->>Pool: Validate amounts & calculate LP tokens
Pool->>stETH: transferFrom(LP, 1000 stETH)
Pool->>LPToken: mint(LP, 2000 LP tokens)
Pool->>LP: Return LP tokens minted
Note over LP,stETH: Time passes, fees accumulate, stETH rebases
stETH->>stETH: Auto-rebase (5% APY)
Note right of Pool: Traders pay fees,<br/>LP position grows
Note over LP,stETH: Claiming Accumulated Fees
LP->>Pool: claimFees()
Pool->>Pool: Calculate pending fees
Pool->>LP: Transfer ETH fees
Pool->>LP: Transfer stETH fees
Note over LP,stETH: Removing Liquidity
LP->>Pool: removeLiquidity(1000 LP tokens)
Pool->>LPToken: burn(1000 LP tokens)
Pool->>Pool: Calculate proportional share + fees
Pool->>LP: Transfer ETH share
Pool->>LP: Transfer stETH share (including rebase yield)
sequenceDiagram
participant Trader as Trader
participant Pool as RebasingParityPool
participant Revenue as ProtocolRevenue
participant stETH as stETH Token
Note over Trader,stETH: ETH → stETH Swap (0% fee)
Trader->>Pool: swap(100 ETH → stETH)
Pool->>Pool: Check pool balances for 1:1 exchange
Pool->>Pool: Calculate 1:1 swap (0% fee)
Pool->>stETH: transfer(Trader, 100 stETH)
Note right of Pool: May include incentive bonus<br/>if protocol has fees
Note over Trader,stETH: stETH → ETH Swap (Dynamic fee)
Trader->>Pool: swap(100 stETH → ETH)
Pool->>Pool: Check pool imbalance ratio
Pool->>Pool: Calculate dynamic fee (0.1% - 5%)
Pool->>Revenue: splitFee(totalFee)
Revenue->>Revenue: 90% to LP pool, 10% to protocol
Pool->>Trader: Transfer ETH (minus fees)
Note over Trader,stETH: Large Swap (Additional protocol fee)
Trader->>Pool: swap(1500 stETH → ETH)
Pool->>Pool: Detect large swap (>1000)
Pool->>Revenue: calculateProtocolFee(enhanced)
Revenue->>Revenue: Extra protocol fee for large swaps
Pool->>Trader: Transfer ETH (minus enhanced fees)
The system implements direct 1:1 token exchanges through a Uniswap v4 hook. ETH→stETH swaps incur 0% fees. stETH→ETH swaps apply dynamic fees ranging from 0.1% to 5% based on pool imbalance ratios.
Rebasing token accounting uses a shares-based mechanism to preserve underlying yield for liquidity providers. The stETH implementation provides 500 basis points (5%) annual yield.
The system operates as a Uniswap v4 hook that intercepts swap operations and applies custom exchange logic. Swaps execute at a 1:1 ratio with the following fee structure:
- ETH → stETH: 0% fee
- stETH → ETH: Dynamic fees based on pool imbalance
Dynamic fees apply to stETH → ETH swaps based on pool balance ratios:
- Ratio ≤ 1.1:1: 0.1% (1,000 basis points)
- Ratio 1.1-1.2:1: 0.2% (2,000 basis points)
- Ratio 1.2-1.5:1: 0.5% (5,000 basis points)
- Ratio 1.5-2:1: 2.0% (20,000 basis points)
- Ratio > 2:1: 5.0% (50,000 basis points)
The ParityLP ERC20 contract represents liquidity provider shares. LP tokens are minted upon liquidity deposits and burned upon withdrawals. Accumulated fees compound automatically into LP token value.
The ProtocolRevenue contract manages fee allocation:
- 90% distributed to liquidity providers
- 10% allocated to protocol treasury
- Additional 0.05% protocol fee applied to swaps exceeding 1,000 tokens
- Protocol fees fund incentive mechanisms for ETH→stETH swaps
The system implements automatic rebalancing through economic incentives:
- Pool imbalance increases stETH→ETH swap fees
- Increased fees generate protocol revenue
- Protocol revenue funds incentives for ETH→stETH swaps
- Incentives encourage deposits that rebalance the pool
Incentive rates are capped at 0.1% and activated only when sufficient protocol fees are available. The mechanism operates within collected revenue constraints.
- Main Pool Contract (
RebasingParityPool.sol): Core pool logic and Uniswap v4 hook integration - LP Token (
ParityLP.sol): ERC20 token for liquidity provider shares - Protocol Revenue (
ProtocolRevenue.sol): Fee collection and protocol treasury management - Rebasing Token (
StETH.sol): Mock stETH with 5% APY for testing