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Complete Example Token Side AMM


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This diagram models a decentralized finance (DeFi) system that illustrates the mechanics of an Automated Market Maker (AMM), token staking rewards, and liquidity pools within a cryptocurrency exchange platform. Central to the diagram are the processes of adding and removing liquidity to the AMM, buying and selling tokens with cryptocurrency, and the calculation of token prices and transaction fees. Resources such as "Token," "Crypto," and "Token Rewards" are stored in pools and are manipulated by various operations like trades and rewards distribution. Registers calculate essential data such as the constant product (K) for liquidity provision, token and crypto amounts for adding or removing liquidity, and the price of tokens in relation to cryptocurrency. The system employs sources and drains to simulate the flow of crypto and token resources into and out of the market, reflecting trade activities and liquidity changes. 

The interactions between pools, registers, and the dynamic calculations of token prices showcase a complex ecosystem where liquidity providers contribute to the liquidity pool receiving rewards, while traders exchange tokens and crypto with the prices influenced by the available liquidity. The diagram encapsulates the core functionalities of an AMM, demonstrating how liquidity is added or removed while maintaining token to crypto ratio, affecting market dynamics and ensuring constant value for each token or cryptocurrency involved. This model can be extended to represent broader mechanisms within DeFi platforms, linking to other economic models or gaming economies where decentralized finance principles are applied.


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