APR Calculations
Last updated
Last updated
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.
The overall pool APR reflects the potential earnings for liquidity providers based on trading fees generated across the entire liquidity pool.
🔹 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.
The APR for the pool is calculated using the following formula:
🔹 Total Trading Fees: The cumulative fees earned from trades in the pool over a specific period (e.g., daily, monthly, annually).
🔹 Total Liquidity Value: The combined value of all assets provided as liquidity in the pool.
Example: If a pool generates $10,000 in trading fees over a year and the total liquidity value is $100,000, the APR would be:
This formula provides liquidity providers with a transparent, high-level estimation of their potential earnings from trading fees.
🔹 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 (e.g., 84% of the 0.25% trading fee is returned to LPs), ensuring 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.
✔️️ 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.