Automated Market Makers
Just a week ago the upgrade of the Stellar network introduced the support for native AMMs (Automated Market Makers). AMM is an interesting concept that allows users to provide liquidity to the markets and earn fees in the process.
Here’s a short summary of how AMMs work on Stellar. Anyone can deposit two Stellar assets they own into a liquidity pool. If someone converts funds through the liquidity pool using assets swap (path payments), contributors to the liquidity pools will earn a share of the 0.3% fees paid by traders.
AMMs might be a familiar concept if you have used products like Uniswap to provide liquidity to market pairs on the Ethereum blockchain.
We are happy to announce that StellarX now provides a simple interface to explore how AMMs work on Stellar and interact with them.
Stellar AMMs are in a class of their own
Compared to other AMMs in the crypto universe, Stellar AMMs are massively different. They are native to the Stellar blockchain.
Having native AMMs makes Stellar the first blockchain to provide liquidity solutions at the protocol level, allowing users of AMMs to take advantage of the near-zero fees on Stellar. There is no need to pay hundreds of dollars in fees to deposit and withdraw with AMM liquidity pools. It also allows all Stellar projects to use the same liquidity. This increases volume and benefits everyone from developers to network users.
Another advantage of AMMs is the improvement they bring to swap functionality on the network. Any Stellar project that has a swap interface automatically started to benefit from better liquidity after the AMM launch. As liquidity pools continue to fill, swaps become more useable and provide improved exchange rates giving users a better trading experience.
It’s easy to get excited about this new functionality. Liquidity providers can keep more of their assets thanks to reduced fees, and due to the inclusive nature of Stellar, anyone can take part whether they have assets worth a few dollars or millions.
Getting started with AMMs on StellarX
Today anyone can participate in AMMs on Stellar by going to stellarx.com.
You can view all activity across Stellar AMM Liquidity Pools from this page. The option to browse top AMM pairs and search for individual pairs enables you to see each pool’s performance, as well as access their Individual Pool Analytics page. Explore top liquidity pools to help you make decisions on where is best to provide liquidity.
Individual Pool Analytics
On the pool’s analytics page you can view transactions and check out the exchange rates of both assets in the pool. Total Tokens Locked section allows you to see the total amount of locked assets in this liquidity pool.
Add Liquidity
To start, log in to StellarX with your preferred method (StellarX account, a Ledger device, or WalletConnect via the LOBSTR app). Once in, head over to the AMM section to access your AMM dashboard.
To start providing liquidity, select Add Liquidity option.
You can use the dropdown menus to select the two assets you would like to use to provide liquidity. Using the input sections, you can enter how much of each asset you would like to provide to the pool. StellarX will automatically balance the other asset as both need to have roughly the same $ value (50%/50%) to be sent to the liquidity pool.
StellarX will then present you with the summary page for the transaction. If you’re happy, click Add Liquidity to finish the process.
Liquidity Pool Overview
Any pools you provide liquidity towards will show in the overview section. From here, you can increase and remove liquidity to each of the pools you’re in and view each pool’s statistics using the graph icon.
Remove Liquidity
In this section, you can select how much liquidity you would like to remove from a pool. The network uses your pool shares to calculate how much of each asset to return to your wallet.
With AMM access enabled for your wallets in StellarX, there has never been more opportunity to decide what to do with your assets on Stellar. We hope you take advantage of these new options and discover what else Stellar can provide for you.
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For more information on AMMs, please follow the links bellow:
