Motivation

Tycho indexes on-chain liquidity, with a current focus on token swaps. Future development can include other liquidity provisioning, lending, and derivatives.

The DeFi Fragmentation Challenge

The rapid innovation in DeFi protocols has created a fragmented ecosystem without standardized interfaces for fundamental operations like swaps, liquidity provisioning, etc.

Tycho aims to provide a standardized interface across those operations.

With a focus on fast local simulations on top of the latest known state of the chain and settlements through tycho-execution.

Key Challenges in Liquidity Indexing

Before Tycho, you might face the following issues if you want to settle on onchain protocols:

Technical Complexity

• Rewrite protocol-specific mathematics in your application programming language to simulate fast locally.

• Develop protocol-specific indexing to supply data for local simulations.

• Watch and filter out user-created token pairs with unusual or malicious behavior.

• Navigate an enormous search space of liquidity sources with effective filtering heuristics.

Blockchain-Specific Issues

• Chain reorganizations ("reorgs") that alter transaction history must be handled with care.

• Block propagation delays caused by peer-to-peer network topology and geographic distribution.

• Continuous maintenance of node infrastructure, such as updating client versions (especially during hard forks), updating storage space, etc.

Push-Based Architecture

Problems with Traditional RPC Polling

Traditional indexers rely on node client RPC interfaces, which have significant limitations:

• Data must be requested from nodes, introducing latency and potential for error.

• Multiple requests are often needed to assemble a complete view of the data.

• Complex query contracts may be required for comprehensive data extraction (e.g., to get all Uniswap V3 ticks) whose execution adds additional latency to data retrieval.

• Load-balanced RPC endpoints can expose inconsistent state views during reorgs, making it hard to scale across many node clients.

• May involve maintaining and running multiple instances of modified node clients.

The Streaming Solution

Tycho adopts a fundamentally different approach:

• Data is pushed/streamed as a block is processed by the node client.

• Current implementation leverages Substreams as the primary data source.

• Alternative data sources can be integrated if they provide comparable richness.

• State changes are communicated to clients through streaming interfaces.

User Experience Philosophy

Abstraction by Default

• Non-blockchain-native users shouldn't need to understand chain-specific concepts.

• Reorgs and optimistic state changes remain invisible to users by default.

• Users perceive only that state has changed, regardless of underlying mechanism.

Optional Transparency

• Advanced users can access detailed information about state changes when needed.

• Granular visibility allows inspection of upcoming state changes.

• Applications can track specific liquidity pair changes for specialized use cases.