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tl-dr
This protocol allows for instantaneous exchange of tokens without waiting for a counterpart to complete the trade.
this is achieved by pooling a token pair and releasing a token immediately a user deposits the other token.
price determination based on the constant product curve if x represent a certain token if y represent another token
a Pool of x-y is created to facilitate exchange of x and y and vice versa between users the pool must hold quantity of x and y such that they are in proportion of 1:1 based on their value
if x = $10 and y = $20
the pool must contain 2x: y
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A Token Pair is Initialized
- token x: 1 part of the swap pair
- ATA to store token X for the AMM
- token y: 1 part of the swap pair
- ATA to store token Y for the AMM
- token x: 1 part of the swap pair
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Mint LP: the mint account that would be used to reward the Liquidity Provider
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Config: Account holding configuration for the pair
AMM must have tokens for both pairs needed to support the market, these tokens are gotten from Liquidity Providers depositing their tokens into a pool for which the AMM would use to support the market, now in order to incentivize users to deposit their tokens, they are rewarded with a token (of lp_mint) which shows that they supported the AMM but adding their tokens to the pool, and once they want their tokens back, this lp_tokens can be used to retrieve tho
- User Deposit Token into AMM