Crypto Gloss

SpiritSwap

SpiritSwap is a Fantom-native decentralized exchange that evolved from a Uniswap V2 fork into a full ve(3,3) governance system (inSPIRIT), serving as the second-largest Fantom DEX after SpookySwap during the 2021–2022 DeFi boom — featuring SPIRIT/inSPIRIT tokenomics, gauge-directed emissions, stable and volatile pools, and a leveraged LP borrowing module (SpiritSwap Lending), before the Fantom ecosystem contraction significantly reduced its activity.

Overview

SpiritSwap launched on Fantom Opera in May 2021, one month after SpookySwap, as the second major AMM on the chain. While SpookySwap targeted simplicity and community fun (Halloween theme), SpiritSwap differentiated through advanced features: earlier adoption of ve(3,3)-inspired governance (inSPIRIT), stable pools for correlated assets (similar to Curve’s StableSwap), and integration of leveraged LP through an embedded lending product.

SpiritSwap held 25-35% of Fantom DEX market share during the 2021-2022 boom, consistently #2 behind SpookySwap, and served as a testing ground for Fantom DeFi mechanics before Beethoven X (Balancer fork) became dominant with ve(3,3) governance in 2022.

Token Architecture

Token design and economics are covered in detail below.

SPIRIT

SPIRIT is the primary emission and governance token:

  • Emission: MasterChef-style, earned by LP positions in SpiritSwap farms
  • Fee capture: 0.05% of all swap fees → used to buyback SPIRIT from market → distributed to inSPIRIT holders or burned
  • Farming: SPIRIT minted to incentivize LP in key pairs (FTM/USDC, SPIRIT/FTM, FTM/WETH, etc.)
  • Initial supply: minted from genesis; ongoing emission through farming rewards

inSPIRIT

inSPIRIT is SpiritSwap’s vote-locked governance token (ve model):

  • Lock: stake SPIRIT for 2 weeks to 4 years → receive inSPIRIT
  • Voting power: proportional to lock duration × amount (4 year lock = max power)
  • Non-transferable: inSPIRIT is a governance position, not a tradeable ERC-20
  • Uses:
    Gauge voting: direct SPIRIT emissions to specific pools (more votes → more SPIRIT to that pool’s LPs)
    Fee revenue: 50% of 0.05% protocol fee → inSPIRIT holders (proportional to inSPIRIT balance)
    Boosted rewards: LPs who also hold inSPIRIT get up to 2.5× boost on their SPIRIT farm rewards
    Governance: vote on protocol upgrades, fee parameters, new pool additions
  • Decay: inSPIRIT voting power decays linearly as lock expires (must re-lock to maintain maximum power)

Trading Mechanics

The following sections cover this in detail.

Stable Pools

SpiritSwap pioneered stable pools on Fantom (before most other Fantom DEXes):

  • Formula: modified constant-sum + constant-product formula for correlated assets
  • Optimized for pegged pairs: USDC/USDT, USDC/DAI, WFTM/sFTM (synthetic FTM), USDC/MIM
  • Dramatically lower slippage vs constant-product AMM for stable trades
  • Fee: lower than volatile pools (0.04% stable vs 0.20% volatile)

Volatile Pools (V2-style)

Standard Uniswap V2 constant-product AMM:

  • Formula: x × y = k
  • Fee: 0.20% per swap (0.15% LP + 0.05% protocol)
  • Key volatile pairs: FTM/USDC, FTM/WETH, SPIRIT/FTM, TOMB/FTM, etc.

Fee Structure

  • 0.20% on volatile pools: 0.15% to LPs + 0.05% protocol
  • 0.04% on stable pools: 0.03% to LPs + 0.01% protocol
  • Protocol fee: used for SPIRIT buyback + distribution to inSPIRIT holders

Gauge Emission System

SpiritSwap implemented gauge voting (ve(3,3) element) ahead of full Solidly:

  • Weekly epochs: inSPIRIT holders vote on gauge weights each week
  • Gauges: each pool has a gauge (SPIRIT emission rate per block for that pool)
  • Weight allocation: pool emissions = (pool gauge votes / total votes) × total SPIRIT emissions
  • Effect: inSPIRIT voters direct emissions to pools they favor → strategic use case (vote for pools you LP in → maximize your APY)
  • Bribe potential: external protocols could theoretically bribe inSPIRIT voters to vote for a pool (informal, not a built-in bribe contract like Votium — unlike Velodrome or Beethoven X later)

SpiritSwap Lending (Leveraged LP)

SpiritSwap integrated a lending market specifically designed for leveraged LP positions:

  • Architecture: Compound V2 fork lending deployed alongside the DEX
  • Leverage loop: borrow FTM against LP token collateral → use borrowed FTM to add more liquidity → stake new LP for more SPIRIT → loop
  • Collateral: SpiritSwap LP tokens accepted as collateral (positions managed within protocol)
  • Risk: if FTM price drops → LP token value drops → liquidation threshold hit → forced exit
  • Use case: levered FTM/USDC LP positions during FTM bull market (Jan-Feb 2022) when SPIRIT emissions were very high
  • Scale: $200-400M at peak in the lending module

Fantom Integration

SpiritSwap was deeply integrated with the Fantom DeFi stack:

  • TOMB/FTM: hosted TOMB/FTM stable pair (competing with SpookySwap’s volatile TOMB/FTM)
  • MIM/USDC: Abracadabra’s Magic Internet Money (MIM) stablecoin stable pool
  • veSTAKE: early governance experiment on Fantom
  • Beethoven X relations: post-Beethoven X’s ve(3,3) dominance, SpiritSwap was sometimes viewed as the simpler alternative; some users preferred SpiritSwap’s interface

Post-Collapse Trajectory

Like all Fantom DEXes, SpiritSwap suffered severely from the ecosystem collapse:

  • LUNA/UST crash (May 2022): Fantom TVL broadly reduced; SpiritSwap lending had leveraged FTM positions → cascading liquidations
  • FTM price collapse: leveraged LP positions in SpiritSwap Lending liquidated → forced FTM selling → further price drop feedback loop
  • Multichain bridge collapse (July 2023): USDC.e/WETH.e illiquid → SpiritSwap stable pools lost peg anchor for USDC.e pools
  • SPIRIT token: lost most value (from $0.80 peak → <$0.005 by 2023)
  • TVL: peaked ~$800M (Feb 2022) → <$10M by 2023

Sources

  1. SpiritSwap Documentation — SpiritSwap Team, 2021–2023. Protocol documentation covering AMM architecture (SpiritSwap Volatile Pool: fork of Uniswap V2 (UniswapV2Pair.sol): xy=k invariant; fee: 0.2% split (0.15% LP + 0.05% protocol treasury); factory contract: creates pairs, stores feeTo (SpiritSwap treasury address); router: handles swaps, adds liquidity; SpiritSwap Stable Pool: custom AMM for correlated assets; uses xy(x²+y²) = k invariant (Solidly-style stable formula — more capital efficient for pegged assets than Curve’s (x²+y²) formulation); fee: 0.04% (0.03% LP + 0.01% protocol)); inSPIRIT mechanics (Voting Escrow contract: lock SPIRIT → receive voting power (not ERC-20 token, stored as mapping); balanceOf(user): decays linearly from lock creation to lock_end; totalSupply(): sum of all voting powers at current time; createLock(amount, unlock_time): transfers SPIRIT → creates lock entry; increaseAmount(), increaseUnlockTime(): modify existing lock; withdraw(): after lock_end, retrieve SPIRIT; SPIRIT fee distribution: SpiritSwap’s 0.05% fee → FeeDistributor.sol (weekly claimable SPIRIT or FTM equivalent for inSPIRIT holders); boost mechanism: LP’s earned rewards × min(1 + 1.5 × (userVePower/totalVePower) × (totalLP/userLP), 2.5)); gauge system (GaugeController: tracks gauge weights (inSPIRIT votes per gauge); epoch: weekly; vote() function: inSPIRIT holder specifies (gauge_address, weight); total weight must ≤ 10000 (basis points); Gauge.sol: mints SPIRIT at rate = (totalEmissions × gaugeWeight / totalWeight) per second; LP stakes in gauge → earns SPIRIT proportional to LP share)..]
  1. “SpiritSwap vs SpookySwap: Fantom’s Competing DEX Philosophies” — Fantom DeFi Comparison, 2022. Comparative analysis of Fantom’s two dominant DEXes — SpookySwap (simpler, community-focused, MasterChef-style farming) vs SpiritSwap (feature-richer, ve model, stable pools, lending) — examining market share dynamics, the role each played in Fantom’s ecosystem, and why SpiritSwap’s feature complexity didn’t translate into higher TVL than SpookySwap.
  1. “Fantom Leveraged LP: SpiritSwap Lending and the FTM Cascade” — DeFi Leverage Research, 2022. Case study of SpiritSwap’s lending module — how leveraged LP positions were built (borrow FTM → add to FTM/USDC LP → stake LP for SPIRIT → borrow more FTM → repeat), and the cascade of forced liquidations when FTM price dropped sharply in May 2022 alongside the LUNA/UST crash.
  1. “inSPIRIT: Early ve(3,3) Implementation on Fantom Before Solidly” — ve(3,3) History Research, 2022. Historical analysis of SpiritSwap’s inSPIRIT implementation — as one of the earliest ve-style DEX governance systems on any non-Ethereum EVM chain, predating the full Solidly launch on Fantom — comparing inSPIRIT’s design to Curve’s veCRV (inspiration), Solidly’s ve(3,3), and later Velodrome’s veVELO, and how SpiritSwap’s gauge system differed from Solidly’s pure ve(3,3) model.
  1. “SpiritSwap Token Economics: SPIRIT Emission, inSPIRIT Lock Rate, and Protocol Sustainability” — DeFi Tokenomics Research, 2022. Quantitative analysis of SpiritSwap’s token economics — SPIRIT emission rates, the relationship between inSPIRIT lock participation and boosted yield, and whether the protocol fee (0.05% of swaps → inSPIRIT) was sufficient to sustain protocol revenue vs the inflation pressure from SPIRIT farming emissions.

Related Terms