TachySwap AMM
Last updated
Last updated
TachySwap is an automated liquidity protocol powered by a constant product formula, implemented in a non-upgradable smart-contract on Etherlink blockchain. This avoids the need for intermediaries making it decentralised, censorship resistance and secure. Moreover, we'll utilise the Uniswap V2 AMM smart-contract that has been fully audited by reputable auditors brands. Users will be able to check this with our verified smart-contract, making the code public to the users hands.
Anyone can become a liquidity provider (LP) for a pool by depositing an equivalent value of each underlying token in return for pool tokens. These tokens track LP shares, and can be redeemed at any time by its owner. Pairs offered on the platform act as automated market makers, they are ready to accept one token for the other as long as the constant product formula is preserved. This formula X * Y = K, trades must not change the product K of a pairs reserve balance (X and K). Due to K remaining unchanged from the reference of a trade, it is often referred as the invariant.
Due to the nature of this formula, larger trades execute at exponentially worse rates than smaller ones, but is highly capital efficient when dealing with smaller trades, and is extremely easy to become a liquidity provider than with concentrated liquidity AMMs, opening a new market to those users starting in crypto.
TachySwap aims to apply a 0.30% fee to trades, this results in each trade increasing K. This is a mechanism utilised as a payout to LPs, when a user burns their pool tokens to withdraw their portion of total reserves.
DEX Fees are distributed as follows*:
| Distribution | Fee % |
|---|---|
LP Provider | 0.20% |
Treasury | 0.05% |
Staking | 0.05% |
Price of paired assets is determined by the ratio of their reserves in the liquidity pool. This price can only fluctuate through trading activity within the pool. Divergences between the price and external prices creates arbitrage opportunities for traders. This ensures that prices moves towards open-market prices.
*The fees distribution might change in the future, DAO vote will run prior to this change.
