AMM
The Automated Market Maker (AMM) is a trading station located on the right side of the DeSat Bank in Arcadia.
"Demand and supply in-game has direct effects on prices of stuff listed on AMM. Also you can add stuff on liquidity pool to help stabilize the prices and receive tokens as reward. Moreover, in adding liquidity be aware of impermanent loss. Works similar with crypto stuff."[1]
What is an AMM?
An AMM is a type of decentralized exchange (DEX) that uses automated formulas for prices.
Using the AMM, Players can trade select items such as Seeds, Ores, or gold at dynamic values.
For example:
If you want want 5 Iron Ore, you can buy off the AMM instead of trading with another player.
When the next person goes to buy Iron Ore, the price can change!
AMM Trading elements:
- Order Type - Instant to order immediately, or Limit to only execute under certain conditions
- Item to Swap & Amount
- Item to Receive & Amount
- Slippage
- Transaction Fee
What is Slippage?
Consider the law of supply vs demand. When you contribute to a resource pool, the supply of that resource goes up, decreasing the value. Likewise, the AMM's value of an asset when initially provided can differ from its ultimate sale value - a form of depreciation.
Slippage is the difference between the value of what you expect to receive vs. what you actually receive.
Tip: Slippage is what's lost during the transaction.
For example:
If you sell 200 Iron Ore for 10 gold each, then you expect 2000 gold.
However, when you sell the Iron Ore on the AMM, you receive 1870 gold.
130 gold was lost in Slippage.
Ideal Slippage
As a player, you want the lowest Slippage possible.
- Keep orders smaller - typically the larger the order, the higher the Slippage!
- Move the slider bar to see the Slippage % for a transaction. If you get a low Slippage %, click Swap!
- You can set the Order Type to Limit to automatically execute the order under certain conditions:
Liquidity Pools
On an AMM, each trade requires a pair of assets. For example, Coal and Gold.
A Liquidity Pool - literally a pool of resources - is used to try to help prevent the value of one asset from increasing drastically... to balance the economy.
A Liquidity Pool is a pool of resources used to help balance a pair of assets.
Impermanent Loss occurs when the value of an asset inflates. The bigger the change, the greater the loss.
LP Tokens
Players who invest in Liquidity Pools receive LP Tokens. LP Tokens represent a share in the Liquidity Pool, and reward a portion of all Transaction Fees associated with the Pool via Gold Bonds.
These Gold Bonds can be traded to Clyde for gold.
"Players who provide resources to the pool gain Liquidity Pool tokens, making them eligible for rewards on exchanges in that liquidity pool. This reward is a percentage of the transaction fee on each transaction proportional to the liquidity you are providing, distributed as a reward token at a 1:10,000 rate to the reward to allow those with small liquidity percentages to still accumulate rewards. These reward tokens can be exchanged at Clyde for a quantity of their base resource according to whatever is available in his shop." [2] -Soulbound Discord FAQ
Adding LP Tokens
LP Tokens can be added under the Add Liquidity tab.
Example:
- Adding 12 Coal and 133 Gold into the Coal<->Gold pool
- Receiving 345271 Coal-Gold LP Tokens
Removing LP Tokens
LP Tokens can be removed under the Remove Liquidity tab.
Example:
- Removing 88447 LP Tokens from the Terracore<->Gold pool
- Receiving 37 Terracore and 523 Gold
Advice on Liquidity Pools
When to invest in an LP:
- you have tons of assets
- LP pair is relatively stable
- there is a huge trade volume
Old LPs are generally not worth any investment. For example, months of investment may only yield 800g.
As of February 2025, Seeds have a better yield.
"its a fun concept, but hard to earn with it a lot. usually due to impermanent loss - if the inflation of one asset is high - you simply better off holding the more valuable asset instead of putting it in the pool" -zoltan
Mostly, LPs are seen as a "try something new" or "fun" mechanic and less as a reasonable form of investment.
Community Requests
The player community has requested an Auction House.
"so AMM has some benefits, an AH would be much better for bigger items, such as gear pieces. small asset size with large quantities would just result in price wars and ppl without 24/7 attention would find it hard to sell anything" -zoltan
See also
- AMM definition from Binance Academy
- Impermanant Loss definition from Binance Academy