⚒️How Savmswap Works

Savmswap is a revolutionary automated liquidity protocol, powered by a constant product formula and realized through a series of immutable smart contracts on the SatoshiVM blockchain. It eliminates the need for trusted intermediaries, emphasizing core values of decentralization, censorship resistance, and fortified security. As an open-source platform, Savmswap operates under the GPL license, ensuring transparency and community engagement.

Each Savmswap smart contract, also known as a pair, administers a liquidity pool consisting of reserves of two ERC-20 tokens.

Becoming a liquidity provider (LP) for a pool in Savmswap is an inclusive process. Anyone can contribute by depositing an equivalent value of each token. In return, they receive pool tokens that represent their pro-rata share of the pool's total reserves. These tokens are redeemable for the underlying assets at any point, offering flexibility and control to the LPs.

The pairs in Savmswap function as automated market makers, constantly prepared to exchange one token for another, adhering to the “constant product” formula. This formula, succinctly expressed as x * y = k, ensures that trades maintain the invariant k – the product of the pair’s reserve balances. The formula is designed so that larger trades, in proportion to the reserves, are executed at exponentially less favorable rates than smaller trades, preserving equilibrium and fairness in the market.

Practically, Savmswap imposes a 0.30% fee on trades, which is then contributed to the reserves, effectively increasing the value of k. This design cleverly rewards LPs, as they realize these gains when they burn their pool tokens to withdraw their share of the total reserves. Looking forward, there's potential to adjust this fee to 0.25%, with the remaining 0.05% serving as a protocol-wide charge.

The pricing mechanism in Savmswap is intrinsically tied to trading activity, meaning that any disparity between the Savmswap price and external market prices can create arbitrage opportunities. This dynamic ensures that the pricing within Savmswap consistently aligns with the broader, market-clearing price.