Introducing V Swap Contract: Composable DeFi
Before diving into the first smart contract of our up-coming Reimann release, we would like to discuss our development philosophy.
At V Systems, we seek to disintermediate finance by innovating at the intersection of blockchain, digital assets, and financial services. We seek to support DeFi-focused ecosystems, developers and users with higher throughput and lower fees at the base layer, without compromising decentralization or security. Our Reimann DeFi contracts aim to enable the delivery of our ecosystem partners’ applications faster and cheaper, with minimal hand-coding to speed up the process of getting an application to production.
The development of our V Swap Smart Contract also embedded with this vision.
Introduction of V Swap Contract
Since Vitalik Buterin posted the famous article “Improving front running resistance of x*y=k market makers” back in 2018, and suggested that we could run on-chain decentralized exchanges using automated market making mechanism, automated market makers (AMMs) mechanism has become a defining piece of the DeFi puzzle.
V Swap is an automated market making protocol, which regulates prices by a constant product formula, and requires no action from the liquidity provider to maintain prices. The contract allows decentralised exchanges to be formed, and allows anyone to be a liquidity provider as long as they have tokens on both sides of the swap.
Any holder of digital assets can provide liquidity for potential trades, earning a yield paid by traders. The price of any trade is determined algorithmically, based on the ratio of available liquidity in the assets being traded.
The liquidity provided is tracked by a token called the liquidity token. The pool will create liquidity tokens according to the proportion of liquidity provided. These liquidity tokens should first be registered and completely issued before the liquidity pool is created.
The user who first creates the pool decides on an initial ratio, and the pool will create:
number of liquidity tokens and give it to the liquidity provider. Where x is the number of base tokens initially placed into the pool, and y is the number of target tokens initially placed into the pool.
Subsequent liquidity providers will obtain liquidity tokens equal to:
Where a is the number of base tokens stored to the pool, and b is the number of target tokens stored to the pool.
Why V Swap is Different
As mentioned in the beginning of this post, our philosophy of “Low Code, Low Fee” has been guiding us to focus on efficiency, transparency, innovation, and financial inclusion.
We hope our Reimann contracts will be able to support a vast and innovative DeFi ecosystem, developers and users can count on higher throughput and lower fees at the base layer, without compromises.
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