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Innovations at Zircon

Zircon is a DEX using an Automated Market Maker (AMM) design, which means that instead of being a platform to match buyers with sellers, there is an algorithm to run things.
Like on classical exchanges, you have trading pairs. Let’s use a pair between Ethereum and USDC, or just ETH/USDC for short.
AMMs have liquidity pools composed of both ETH and USDC (and of course other pairs). The market maker algorithm defines at what price users can buy or sell ETH for USDC. In simple systems like Zircon or Uniswap V2, the price is the ratio between the number of assets in the pool. So if there are 10,000 USDC and 10 ETH inside the pool, it means that the price of 1 ETH is 1,000 USDC.
Zircon is building a complete solution against impermanent loss and the issues of providing liquidity to AMMs.
Our first step is Zircon Pylon, a solution to allow liquidity providers to supply only one asset to each pair. If you’ve ever tried to supply liquidity in the most popular AMMs, you’ll know that you need to provide both tokens in the pool at a 50/50 split.
Zircon takes a different approach to providing liquidity: stay in your favorite assets and provide liquidity to pairs traders care about.
To realize these goals, each liquidity pool in Zircon (based on Uniswap V2) is divided into two sides, called the Float vault and the Stable vault. The names represent what they always aim to do: the Stable side is designed to never change in value, while the Float side fluctuates and is higher risk.
Stable vaults are designed to hold stablecoins, but they can also hold liquid tokens like ETH, BTC and others. Float vaults are for everything else. In general, the Float should always be the more volatile token in the pair.
The Pylon algorithm takes a liquidity pool, and splits it into two sides. It then uses price and liquidity information to make sure that Stable and Float liquidity providers only care about the price of their respective token.
To better understand how the system works, let’s see two examples.