Uniswap
Description
Blockchain for Good:
"Uniswap is a protocol with two functions: a DEX* (Decentralized Exchange) and an AMM (Automated Market Maker).
A DEX allows users to exchange their crypto-assets for other crypto-assets, for example exchange CICs for Sarafus. To do this, Uniswap relies on “liquidity providers” who deposit crypto-assets in reserves, being remunerated for this through transaction fees levied on traders, those who exchange crypto-assets (their amount is equivalent to 0.3% of the amount exchanged). Thus, with such an incentive mechanism to replenish the crypto-asset reserves, the exchanges (swaps) can be done quickly.
Uniswap is organized around “pairs,” which are called liquidity pools. These liquidity pools consist of two crypto-assets, which are fed by users of the liquidity provider network. For the liquidity provider, the model is simple: one can deposit as much of each crypto-asset as she wants in a dedicated pool (CIC & Sarafu) as long as a parity is respected. This parity corresponds to the equation x*y = k, x: for the quantity of the first crypto-asset, y: for the quantity of the second, and k: the multiple (or product) of the two. Cash deposits will only be accepted if they respect this parity.
On the other hand, this invariant is subject to change by crypto-currency exchanges. Indeed, when someone decides to exchange one crypto-currency for another, the stocks change: a new invariant is calculated, and the new deposits will be conditioned to the respect of this new invariant.
This model of calculating the invariant and adjusting it according to the trades made is called AMM (Automated Market Maker). Once the invariant is calculated, it is used as the basis for calculating the exchange rate between the two crypto-currencies."