APR Calculations
XenDEX leverages the Constant Product Market Maker (CPMM) model to ensure liquidity is uniformly distributed across all price ranges. This design simplifies trading and APR calculations, benefiting both traders and liquidity providers by creating a straightforward and efficient system for rewards.
Overall Pool Estimated APR
Definition
The overall pool APR reflects the potential earnings for liquidity providers based on trading fees generated across the entire liquidity pool.
Assumptions
Trading fees are distributed proportionally among all liquidity providers.
Liquidity positions are uniform across all price ranges, as the CPMM model maintains consistent liquidity distribution.
Calculation
The APR for the pool is calculated using the following formula:
APR = (Total Trading Fees / Total Liquidity Value) × 100
Where:
Total Trading Fees: The cumulative fees earned from trades in the pool over a specific period.
Total Liquidity Value: The combined value of all assets provided as liquidity in the pool.
This formula provides liquidity providers with a transparent, high-level estimation of their potential earnings from trading fees.
XenDEX-Specific Considerations
Uniform Liquidity Distribution Liquidity is always available across all price points, ensuring smooth and continuous trading without fragmentation.
Transparent Fee Structure Rewards are derived directly from trading fees, ensuring that liquidity providers benefit proportionally to their contributions.
Simplified APR Calculation The CPMM model eliminates the complexities of range-based calculations, offering a straightforward and transparent approach to reward estimation.
Benefits of XenDEX's CPMM Model
Consistent Liquidity: Traders experience uninterrupted access to liquidity across all price ranges.
Simplified Rewards: Liquidity providers receive proportional rewards directly from trading fees without additional complexities.
Transparency: APR calculations are clear and easy to understand, aligning with XenDEX's commitment to accessibility and user-friendly DeFi solutions.
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