Dynamic AMM token pricing Model

Description

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This diagram models a cryptocurrency trading and liquidity management system, intricately mapping out the mechanics of token and cryptocurrency exchanges, staking rewards, liquidity pools, and the calculation of token prices. It illustrates a dynamic economic model that involves buying and selling tokens and cryptocurrencies, adding and removing liquidity, collecting transaction fees, and determining the market value of tokens in a decentralized finance (DeFi) ecosystem.

At the heart of the system are pools that represent various assets like tokens, crypto, token rewards, and liquidity information. Source nodes indicate the inflow of resources â€” for instance, crypto entering the automated market maker (AMM), or liquidity being added. Pools accumulate these resources, affected by actions simulated through gates that control the flow based on specific conditions or randomized events, and trades executed by users. Registers compute outcomes such as tokens bought, crypto exchanged, and the new token price, based on the current state of the pools, enforcing the logic behind transactions and liquidity adjustments. Drains represent the outflow or consumption of assets, depicting elements like tokens sold or liquidity removed. The comprehensive use of resources, state connections, and gates outlines the cyclical nature of trading and liquidity management, capturing the complexities of DeFi protocols.

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