Polkaswap is a non-custodial AMM-DEX protocol for exchanging tokens based on the Polkadot network, Parachains and blockchains connected through bridges. The Polkaswap protocol effectively removes trusted intermediaries and provides the opportunity for faster transactions. Polkaswap is open source software licensed under Apache V2.
Polkaswap is a DEX that can set up multiple liquidity sources based on a liquidity aggregation algorithm. When a trader invokes the swap function, the liquidity aggregation algorithm will execute the order using the best quote provided by the liquidity source. Liquidity sources can be represented as AMMs, order books or other algorithms. Because Polkaswap is an open source project, it is possible to add more liquidity resources as a community by developing within the Polkaswap module.

The Polkaswap token (PSWAP) enables users to create liquidity on token trading pairs in the Polkaswap DEX: the so-called liquidity collateral. Transaction fees are used to buy back and burn PSWAP tokens, and mint new PSWAP tokens to reward liquidity providers. The PSWAP token issuer will be a smart contract that will distribute PSWAP according to programmed logic and incentivize the growth of Polkaswap. Additionally, XOR tokens will be used to pay network transaction fees.
PSWAP tokens utilize a token deflation model to incentivize liquidity providers. A 0.3% fee per transaction in the Polkaswap DEX is used to buy back PSWAP tokens. A portion of these PSWAP tokens are allocated to liquidity providers and a portion is burned to reduce the supply of tokens. At first, 100% of the repurchased PSWAP tokens are allocated to liquidity providers, but over time this percentage decreases as tokens are burned.