ALT: Aggregate Liquidity Technology

Decentralized exchanges often need to combine liquidity from multiple sources in order to provide the best prices to their users. However, combining liquidity from multiple sources into a single trade has not only required high transaction fees, but is also computationally expensive. Here, we propose a framework for combining liquidity from multiple sources, called Aggregate Liquidity Technology (ALT). ALT maps each liquidity source onto a 2-dimensional space as a curve or line segment, where the input token is on one axis and the output token is on the other. Once this is accomplished, liquidity sources can be combined by finding the points where the curves or lines intersect. Users can get the optimal liquidity on each trade by maximizing the number of output tokens returned. ALT is implemented into Polkaswap on the Parity Substrate-based SORA network, which has processed more than $1 billion worth of token swaps. While the current iteration of ALT works only on a single blockchain network, future work should explore ways to combine liquidity using this methodology across multiple blockchain networks and even centralized exchanges.