What is AMM automated market making?
AMM, the full name is Automated Market Making, which means "automated market making". SuperEx's AMM calculates the buying and selling prices based on the formula and provides continuous quotes to the market. In terms of trading mechanism, SuperEx adopts a combination of AMM+order book, and the system will automatically convert the capital pool into an order book.
The free listing + AMM function launched by SuperEx enables ordinary users of centralized exchanges to quickly list tokens. They can also become market makers by providing liquidity to the fund pool and obtain transaction fees returned by SuperEx.
Pricing Mechanism and Models of AMM
Unlike traditional order book models, AMMs rely on mathematical formulas to define pricing rules for assets in liquidity pools. SuperEx adopts the most common Constant Product Model, represented by the following equation: x*y = k
Where:
• x and y represent the quantities of two assets in the liquidity pool.
• k is a constant.
Each trade affects the quantities of the two assets in the pool, dynamically adjusting their prices according to the constant product formula to balance supply and demand.
Liquidity Pools and Liquidity Providers (LPs)
Liquidity pools are the foundation of AMM trading, where liquidity providers (LPs) inject assets to maintain trading liquidity. Upon depositing funds, LPs receive liquidity tokens (LP tokens) as proof of their contribution and earn rewards proportional to the trading volume in the form of transaction fees.
SuperEx’s AMM Market
Any token in Spot Free Zone supports automated market-making is an AMM market. The AMM market uses a different fee system from other non-AMM market in Spot Free Zone. VIP does not enjoy any rate discount.
Incentives:
Economic incentives encourage LPs to continue supplying liquidity, ensuring the sustainability of trading. SuperEx’s AMM mechanism further enhances this process by distributing 100% of transaction fees to liquidity providers, with rewards settled hourly.
How to Participate in SuperEx AMM
Becoming a Liquidity Provider
1. Choose an AMM liquidity pool: For example, TSCS/USDT.
2. Deposit assets: Add USDT and the target token in a specified ratio.
3. Earn dividents: Generate income from transaction fee sharing.
Example of Reward Calculation
Assume the TSCS/USDT liquidity pool generates the following fees within an hour:
• 100 TSCS
• 1000 USDT
If you own 1% of the liquidity pool, your reward for that hour will be:
• TSCS share: 100 x 100% x 1% = 1 TSCS
• USDT share: 1000 x 100% x 1% = 10 USDT
Note: Rewards are distributed every hour, ensuring transparency and immediacy in earnings.
Advantages of AMM
1. Simple and efficient: Just deposit funds to become a liquidity provider.
2. Flexibility: Add or withdraw funds at any time, with no restrictions.
3. High returns: 100% of transaction fees are allocated to liquidity providers, with frequent payouts.
Risk Warning: Impermanent Loss
Liquidity providers may face impermanent loss due to market price fluctuations.
• Cause: When asset prices deviate from their initial levels, the proportion of assets in the liquidity pool changes, potentially leading to a decrease in the total value of assets withdrawn.
• Mitigation: If prices return to their original levels, the loss will gradually disappear.
Recommendation: Participants should understand the impact of impermanent loss and assess their risk tolerance before investing.
Supported Assets for AMM
Unless otherwise specified, all assets in the SuperEx Spot Free Zone support the creation of AMM liquidity pools. Detailed rules can be found in the relevant documentation.