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You're reading from  Building Full Stack DeFi Applications

Product typeBook
Published inMar 2024
PublisherPackt
ISBN-139781837634118
Edition1st Edition
Concepts
Blockchain
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Author (1)
Samuel Zhou
Samuel Zhou
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Samuel Zhou

Samuel Zhou has over 15 years of software engineering experience in top high tech companies including being a blockchain developer as his hobby since 2018. In 2022, Samuel turned his enthusiasm on blockchain technology into a business by founding TiFi, which is a silicon valley based startup that builds e-Commerce platform on blockchain and brings blockchain to everyday life. Over there he has created TiFi Token that offers token rebates so people can get cash back when spending the token. Also he has built TiFi Bank which is a DeFi application that offers crypto saving, lending, trading, staking and liquidity management features. Samuel holds a Master Degree and a Bachelor Degree in Computer Science.
Read more about Samuel Zhou

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The mathematics of AMMs

AMMs are a type of DEX that rely on mathematical formulas to set the price of a token. The trading process and determination of the price are done automatically without depending on other traders.

As we discussed previously, the concept of liquidity pool plays the most important role for AMMs. An liquidity pool typically consists of two or more types of crypto assets. Here, we want to introduce the term relation function of a liquidity pool. We will walk through the concept to understand how liquidity pools work.

Relation functions

A liquidity pool usually has a formula to define the relations and constraints of assets (there could be two or more assets in the liquidity pool). Here, we relation functions come into scope.

A relation function of the types of assets in liquidity pools defines how the specific AMM works. A relation function defines the conditions the reserves of all types of assets in a liquidity pool must satisfy. The market makers...

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Building Full Stack DeFi Applications
Published in: Mar 2024Publisher: PacktISBN-13: 9781837634118
© 2024 Packt Publishing Limited All Rights Reserved

Author (1)

author image
Samuel Zhou

Samuel Zhou has over 15 years of software engineering experience in top high tech companies including being a blockchain developer as his hobby since 2018. In 2022, Samuel turned his enthusiasm on blockchain technology into a business by founding TiFi, which is a silicon valley based startup that builds e-Commerce platform on blockchain and brings blockchain to everyday life. Over there he has created TiFi Token that offers token rebates so people can get cash back when spending the token. Also he has built TiFi Bank which is a DeFi application that offers crypto saving, lending, trading, staking and liquidity management features. Samuel holds a Master Degree and a Bachelor Degree in Computer Science.
Read more about Samuel Zhou

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