Sherpa

Introducing the unique algorithm Sherpa designed by EISEN Finance to minimize the slippage.

Swaps using the Sherpa

EISEN Finance uses its swap algorithm, Sherpa, to find the optimal swap path for every new block, enabling swaps with reduced price impact and slippage.

Similar to Himalayan Sherpas guiding climbers safely and efficiently, EISEN Finance's swap service uses the 'Sherpa' engine to navigate users through the crypto space, ensuring they attain the optimal swap ratio. Presently, EISEN Finance's swap service is accessible on EVM-compatible mainnets.

Price impact

Automated Market Makers (AMMs) make swap rates vary with the amount being swapped. Price impact is the difference between the swap rate for a small selling amount and the swap rate for the actual selling amount.

Slippage

DEXs utilizing AMMs provide only market orders, leading to variations in swap results for transactions involving the same pools on the blockchain. Slippage is the discrepancy between the expected and actual amounts

Merge Swap Routing

Sherpa leverages the composability of DeFi to access all available liquidity sources on the chain, as most DeFi liquidity pools are permissionless. When accessing liquidity sources, there are five methods for routing sell tokens, as described below. EISEN uses the most advanced approach, merge swap routing, which allows it to provide traders with better swap prices than other protocols using simpler algorithms.

(1) Multi-hop Swap

Multi-hop swap refers to the process of finding the optimal swap path where the entirety of sell tokens only pass through multiple DEXs, without being split.

(2) Batch Swap

Batch swap refers to the process of finding the optimal swap path where the sell tokens are split into multiple DEXs, without each split amount passing through other DEXs.

(3) Multi-hop Batch Swap

Multi-hop batch swap, as the name implies, refers to the process of finding the optimal swap path where batch swaps are linked in a serial manner, as shown in the figure below.

(4) Linear Split Routing

Linear split routing is the most common form of routing the sell tokens, where multiple-hop batch swaps are executed in a batch( A -> C -> B path and A -> D -> B path), as shown in the figure below.

(5) Merge swap

Merge swap is the most sophisticated form of routing for selling tokens, designed to minimize gas fees by merging overlapping paths among swap components. It significantly expands the search space to find the optimal path and minimize operations, as shown in the figure below.

Reduced Price Impact

• By splitting the sell amount into multiple DEXs, Sherpa can reduce the price impact.

• See the paths colored in red below.

• 100A in DEX 1 (single DEX) takes up a greater proportion than 40A in DEX 1 (DEX aggregator).

• This is why the price impact is lower when using a DEX aggregator than a single DEX.

Reduced Slippage

• By capturing potentially profitable arbitrage opportunities that arise when traders swap their assets and return a portion of the profits to traders, Sherpa offsets traders' losses from slippage.

• To explain further, whenever a trader swaps asset ETH for USDC, the front-running transaction that also swaps ETH for USDC will drive up the price of USDC and cause slippage for the trader.

• Sherpa therefore examines whether the cyclic arbitrage path USDT -> USDC -> ETH -> USDT can generate a profit, given that the price of USDC has increased.

• If the arbitrage is deemed profitable, Sherpa executes it and returns a portion of the profits to traders.

• Asset USDT is sourced from EISEN's own vault (for EVM-incompatible chains) or through a flashloan (for EVM-compatible chains).