I Started to Dip My Toe into Diesel Pools Lately

Diesel pools are the Uniswap-style Automated Market Maker (AMM) built by the team that also built Hive-Engine.

I watched the announcements regarding the evolution of the diesel pools development for quite some time, but effectively I only started to use them recently.

There are some significant differences between an AMM like Uniswap or PancakeSwap, to which CubFinance investors are more accustomed with, and diesel pools.

First of all, there are no swap/transaction fees in diesel pools. We are in the Hive ecosystem after all. The problem with the no fees approach is how do you incentivize liquidity providers? The solution they found is through additional BEE inflation, pending approval of BEE stakeholders for each pool which wants to add it, as well as manually adding one of more "bags of rewards" from where distribution takes place.

These bags of rewards can be ANY token, as far as I understood. It is not uncommon to have a diesel pool offer multiple reward tokens, like we can see in the screenshot below, for the SWAP.HIVE:PIZZA pool:

It is also possible that a diesel pool has no LP rewards at all, in which case the golden text "has LP rewards" won't show below the pair. That's another difference, on the "traditional" defi platforms you most likely won't see unincentivized pools, at least from the collected fees.

Compared to the regular Hive-Engine or LeoDex websites, with order books, diesel pool AMMs have a higher liquidity. Which means you can more easily swap between two tokens of a pair than through Hive-Engine when you have higher amounts.

People who have only traded using order book systems so far should first learn about slippage for swapping tokens and impermanent loss if they intend to provide liquidity to a pool.

What diesel pools lacks is a more decentralized infrastructure. I remember some time ago the main API server for Hive-Engine from the core team failed and everything pretty much froze until it was restored. They have backups and all, but still it's not decentralized from what I can tell. That means that even with the witness system for HE, this still needs more work.

Diesel pools are an improvement over Hive-Engine order books, that's a certainty. They keep up with the times, and that's great. And diesel pools just started to be used little by little by various projects. If Hive-Engine itself produced an entire economy around it, I wonder where its upgrade (including Outposts and NFTs capabilities) will lead to.

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