Introduction to swapping on Xebra AMM

Introduction

Xebra Swap is a peer-to-peer system designed for exchanging cryptocurrencies on the Movement M2 chain. It leverages the automated market maker (AMM) model to facilitate seamless and efficient token swaps without the need for traditional order books.

How It Works

• Swapping Process: Users can sell their existing tokens for a proportional amount of the desired tokens. During this process, a small swap fee is deducted and distributed as incentives to liquidity providers.

• Trading Fees: Whenever someone trades on Xebra Swap, a fixed fee is charged. For testnet/ devnet, fee obviously is zero.

• Earning Fees: Liquidity providers earn a share of the trading fees generated from the swaps in the liquidity pool.

• Price Impact: The final execution price of a swap is affected by the liquidity at different price points. Higher liquidity leads to lower price impact, while lower liquidity results in higher price impact.

• Slippage: Users can set a slippage tolerance, which limits the acceptable price impact during a transaction. If the final execution price falls within this range, the transaction executes; otherwise, it fails.

What happens under the hood when you swap or provide liquidity

The Swap Architecture of Xebra currently supports traditional Uniswap V2 pools with uniform liquidity and will soon integrate Uniswap V3-style concentrated liquidity pools.

Key Components

• Automated Market Maker (AMM): Xebra utilizes the AMM model, allowing users to trade assets directly from liquidity pools. This model replaces the traditional order book system.

• Liquidity Providers (LPs): Users who provide liquidity to the pools are known as LPs. They deposit their assets into the pool and, in return, receive LP tokens as a receipt of their deposit. These tokens can be redeemed for the underlying assets plus any accrued fees.