Clipper is a decentralized exchange (DEX) powered by the SAIL governance token that aims to minimize transaction costs and prioritize fairness for traders of all sizes. Its architecture addresses issues such as profit scalping and impermanent loss commonly encountered on other DEX platforms. ^[1]

Shipyard Software Inc. created Clipper and subsequently licensed to AdmiralDAO, a non-profit member-managed DAO LLC in the Marshall Islands.

Overview

Clipper is a decentralized exchange (DEX) that prioritizes low per-transaction costs, including fees, slippage, and gas fees. Unlike many DEXs that prioritize high dollar trading volumes, Clipper is designed to serve traders of all sizes, aiming to counter the tendency of existing exchanges to favor more prominent traders like whales and hedge funds. This approach seeks to mitigate profit-scalping opportunities for bots and arbitrageurs that often disadvantage retail traders. ^[2]

The design of Clipper diverges from conventional DEX models in several ways. It utilizes a distinct Automated Market Maker (AMM) mechanism called the Formula Market Maker (FMM), departing from the widely used Constant Product Market Maker (CPMM). Additionally, Clipper incorporates design choices that prioritize better prices for smaller trades, even at the expense of price competitiveness on larger trades. These design differences enable Clipper to offer users favorable prices on small trades and superior liquidity provider (LP) yields without experiencing impermanent loss. ^[2]

Clipper's architecture ensures liquidity providers earn profits through an arbitrage strategy similar to professional market makers, all while operating in a permissionless and non-custodial manner. The platform's off-chain pricing mechanism combines low-latency price feeds from centralized exchanges with on-chain state snapshots, allowing for accurate price computation and validation through on-chain proofs. By profiting from arbitrage opportunities rather than imposing fees on traders, Clipper keeps gas fees low while ensuring superior yields for LPs without impermanent loss. Additionally, Clipper prioritizes fairness by minimizing the presence of whales and bots, thus preventing the front-running of trades. ^[2]

Shipyard Software Inc.

Shipyard Software Inc. specializes in developing customized blockchain-based trading products catering to specific types of traders and financial instruments. Leveraging automated market-making technology developed by its CTO, Abe Othman, Shipyard aims to provide a cost-effective crypto trading experience tailored to individual user requirements. Through its products, Shipyard aims to democratize access to decentralized finance (DeFi) by offering tailored trading experiences for all types of traders. The company utilizes its funding to enhance specialized decentralized exchanges (DEXs), fostering a more inclusive DeFi ecosystem and enabling users to trade freely and fairly with a comprehensive suite of customized tools. ^[3]

AdmiralDAO

AdmiralDAO, supported by Admiralty LLC, operates as a non-profit member-managed LLC registered in the Marshall Islands. The DAO oversees a multi-sig wallet with multiple signers. It is dedicated to decentralization, although its implementation is still in progress. The focus lies on ensuring technical security and operational efficiency. Members actively participate by proposing and voting on AdmiralDAO Proposals (APs) and ensuring their execution. AdmiralDAO is a hub for builders, managing various DeFi products tailored to different traders and communities. ^[4]

AdmiralDAO's guiding principles prioritize the inclusion of active contributors in its governance system. Decentralization is crucial, ensuring token holders and community members have a say in decision-making processes. Transparency is maintained through open communication of all governance procedures, proposals, and voting outcomes, fostering trust and accountability. Operational efficiency is prioritized to enhance competitiveness in the DeFi ecosystem, achieved through streamlined processes, clear guidelines, and secure mechanisms for timely decision-making. ^[4]

Technology

Liquidity Pools

Clipper opts for smaller liquidity pools as a design choice to balance fees and slippage for small trades. Despite lower capital in these pools, trading fees remain low enough to offer LPs adequate yields for maintaining liquidity. While smaller pools may result in increased slippage, reducing fees offsets this impact for small trades. However, larger trades experience more significant slippage than the decrease in trading fees, making Clipper less favorable for whales and arbitrageurs. Clipper offers two distinct liquidity provision and yield collection structures: Core Pools and Coves. ^[2]

• Core Pools are multi-asset liquidity pools consisting of Core Assets, representing 80% of DeFi trade volume. They are optimized for small trades and can be used for asset trading or liquidity provision. Unlike typical DEX pools, Clipper LPs earn a yield on their share of the entire pool, represented by LP tokens (CLPRDRPL). These tokens consolidate liquidity across chains like Ethereum, Polygon, Optimism, and Arbitrum, enhancing capital efficiency and yield potential. ^[2]
• Clipper Coves comprise an ecosystem of liquidity pools facilitating swaps between asset pairs. Each Cove is a two-asset pool comprising Cove Asset and CLPRDRPL tokens. Cove Assets encompass all altcoins/tokens outside Clipper Core Assets, enabling swaps between asset pairs. CLPRDRPL tokens in Coves streamline trading costs as a "go-between" asset. Coves support swaps between Cove Assets, Core Assets, and Cove Assets, and vice versa, offering LPs the opportunity to earn double yield. Supported chains for Coves include Polygon, Optimism, and Arbitrum. ^[2]

Farming Pools

In August 2023, Clipper added an option for liquidity providers (LPs) to deposit funds into a farming contract while providing liquidity on Optimism. This new farming pool is the default Core Pool on Optimism and allows LPs to earn reward tokens for staking their liquidity. Initially, farming rewards are available on Optimism with OP as the reward token, with potential expansion to other networks and reward options in the future. ^[5]

The farming pool operates similarly to a Core Pool, consisting of Core Assets while offering farming rewards. It supports both an individual asset and multi-asset deposits. LPs can view their potential reward token earnings upon depositing into the farming pool, with rewards accumulating gradually over 30 days. LPs can harvest their rewards at any time or maximize their claim by harvesting at the end of the 30 days. Like Core Pools, LPs receive ClipperLP tokens upon depositing into the farming pool, which can be exchanged for reward tokens upon harvesting. ^[5]

Formula Market Maker (FMM)

Introduced in April 2022, the Formula Market Maker (FMM) enables off-chain computation while maintaining custody. It operates as a hybrid mechanism, combining on-chain and off-chain components and utilizing formulas from the invariant function family outlined in Shipyard's market-making whitepaper. Unlike CPMMs, which rely solely on token ratios within pools for pricing, the FMM integrates external real-time market prices from centralized and decentralized oracles for pricing computations. This off-chain approach minimizes gas costs while ensuring trustlessness and transparency through on-chain verification and validation of pricing computations. ^[6]

On Ethereum, the FMM conducts comparative price computations and validations off-chain against on-chain data, reducing gas usage and associated costs for traders and liquidity providers (LPs) compared to other leading DEXs. Additionally, there's a misconception surrounding impermanent loss (IL) in DEX liquidity pools, primarily due to CPMMs' utilization. However, Clipper's FMM addresses this issue by utilizing sophisticated market-making techniques, including decentralized price oracles, to dynamically balance assets based on external market price changes, thereby minimizing the risk of impermanent loss for LPs. ^[6]

Community Adventures

Clipper organizes Adventures, which are immersive experiences that blend a digital scavenger hunt with a turn-based game featuring pirate-themed storylines. Participants form teams, each comprising a ship, a captain, and a crew of pirates, racing through Web3 activities to uncover treasure. These Adventures provide the Clipper community with an entertaining, gamified approach to platform engagement, offering opportunities to win prizes and connect with fellow community members. ^[1]

SAIL Token

SAIL is the utility governance token of the AdmiralDAO and Clipper DEX. SAIL holders stake their tokens to receive veSAIL, which grants equivalent governance rights. ^[7]

Partnerships

0x

On October 1, 2021, Clipper was fully integrated with 0x. This integration enabled traders using 0x's DEX aggregator, Matcha.xyz, and other dApps relying on the 0x API to access Clipper. ^[8]

“Clipper’s custom-built approach takes a big step towards giving crypto traders more optionality and convenience. This type of user-centric optimization is much needed within the DeFi space, and reflects many of the overarching goals 0x has set out to accomplish.” - Amir Bandeali, co-CEO of 0x Labs.

Polygon

On October 25, 2021, Clipper DEX integrated with Polygon. By deploying on Polygon, Clipper significantly reduced overall gas expenses and introduced a feature allowing users to specify precise output amounts for each swap, mitigating front-running risks. Unlike transactions conducted on the Ethereum mainnet, where output amounts for swaps could fluctuate between initiation and execution, Clipper's integration with Polygon provided users with firm quotes, eliminating concerns regarding slippage and front running. While Clipper had experienced minimal instances of explicit front running or arbitrage botting due to its design, rejected transactions due to slippage were common among DEX users. However, with the integration with Polygon, Clipper users no longer needed to worry about such issues. ^[9]

“We built Clipper knowing it would expand to layer two networks and scaling platforms like Polygon in order to provide lower gas, better pricing and faster speeds to retail traders. Now that we’ve adapted Clipper to Polygon, we will be able to launch Clipper on other networks as well. Clipper should be everywhere its traders want to be.” - Mark Lurie, CEO of Shipyard Software

Optimism

In February 2022, Clipper announced its integration with Optimism. To address the issue of high gas costs, especially for retail traders, Clipper took steps to minimize transaction expenses. Custom methods were developed to utilize compressed calldata, reducing Clipper transaction costs by approximately 50%. ^[10]

Base

On March 18, 2024, Clipper expanded its operations to Base, introducing an ETH <> Stables core pool tailored to expedite and reduce the cost of transactions involving DeFi's most commonly traded assets. This expansion provided DeFi participants with additional choices for liquidity provision and trading on Clipper. ^[11]