The first climate positive decentralised trading centre
Brokoli’s Decentralised Exchange will enable carbon offsets to be part of every trade seamlessly and without damaging user experience. The DEX builds upon the more capital efficient model of trading enabled by Uniswap v3: slippage fees will be used for climate positive action: renewable energy project finance, planting trees, waste collection and recycling.
Because of the volatility and rapid price movements, liquidity providers are not usually able to execute the trade at an agreed price. Slippage is the difference between the expected price of a trade and the executed price of that trade. It is more likely to happen when there is a higher level of volatility, such as breaking news that forces unexpected trends in the market. This condition can make it extremely unlikely for DEXs to be able to execute any trades at the expected price.
Brokoli will leverage the existing technical infrastructure and become a green gateway to other DEXs, where the liquidity provider is in control of the price ranges in which their funds are used. This system is based on the concept of concentrated liquidity: prior to the trade, the price movements are bounded within an agreed price range. As a result, users will be able to flexibly choose the fee range - the initially supported fee tiers will range from 0.05% to 10% of the transaction.
The fee for the transaction that is not used to offset the price movements will be used to offset carbon footprint in a decentralised vote (see Decentralised Offsetting Process for more details). Therefore, each trade will seamlessly have a climate fee attached to it without interrupting the user experience for liquidity providers, and without increasing token exchange costs for the user.
EXAMPLE: On Brokoli’s DEX, a person chooses to exchange 1 ETH for Token X and sets the swap fee range at 1%. Let’s assume that during a transaction, 1 ETH depreciates by 0.1% in terms of Token X, and the trade is executed. This means that the climate fee is: 1% - 0.1% = 0.9% of the transaction value. As a result, the liquidity provider pays 1% of the transaction value to Brokoli, of which: 0.1% of transaction value is used to mitigate for volatility and 0.9% will be used for climate positive action.
In the end, the user gets the same price that he would get on Uniswap - he chooses the slippage that he tolerates. Excess slippage then goes to positive climate offset solutions.