How TrumpSwap works
Last updated
Last updated
TrumpSwap is an automated liquidity protocol built on the Uniswap V2 framework, utilizing a constant product formula. Designed to eliminate the need for trusted intermediaries, TrumpSwap emphasizes decentralization, censorship resistance, and security.
Anyone can participate as a liquidity provider (LP) by depositing Trump47 tokens along with an equivalent value of another ERC-20 token (ETH) into liquidity pools. By doing so, they help facilitate trading and enhance liquidity on the platform. In return for their contributions, LPs receive pool tokens that represent their pro-rata share of the total reserves, allowing them to benefit from trading fees generated by the platform when they decide to redeem their pool tokens.
In TrumpSwap, liquidity pairs function as automated market makers (AMMs), continuously ready to accept one token in exchange for another while preserving the "constant product" formula. This formula, expressed as x×y=k , ensures that trades do not alter the product (k) of the pair’s reserve balances (x and y). Since k remains constant from the perspective of a trade, it is often referred to as the invariant. This property leads to larger trades (relative to reserves) executing at exponentially worse rates compared to smaller trades.
In practice, TrumpSwap applies a 0.30% fee to trades, which is added to the reserves. Consequently, each trade increases k, functioning as a reward for liquidity providers (LPs). LPs can realize this reward when they burn their pool tokens to withdraw their share of the total reserves.
Because the relative price of the two pair assets can only be changed through trading, divergences between the TrumpSwap price and external prices create arbitrage opportunities. This mechanism ensures that TrumpSwap prices always trend toward the market-clearing price.
