A SOLUTION ON OPTIMAL ONE SIDED LIQUIDITY MINING IN DEX

Abstract

Decentralised crypto exchanges or DeX has created a revolution in the Decentralised finance industry. With the creation of Uniswap and other defi lending-borrowing protocols, the DeFi industry has seen a meteoric growth in the late 2020. Currently the market capitalization of Defi industry is around 92 billon dollars in which the Dex is contributing around 60-70% of the total market capitalizations. DeX offers a lots of services like swapping of tokens, creating liquidity pools, lending and borrowing, flash loans, staking and harvesting. These services are controlled by Smart Contracts which contains set of instructions that executes itself automatically when some conditions are met. The rate of swapping of tokens is decided by a mathematical formula which usually called as AMM or Automated Market Makers. The AMM decides the rate or price of a token depending upon the amount of token pairs that are available in the liquidity pool. Every token swap that happens on the DeX is accompanied by a liquidity provider fee. This liquidity provider fee is distributed among the address that have provided liquidity to that pool. Liquidity is always added in token pairs. The AMM also decides the amount of token pairs that we need to provide for addition of liquidity into a already created pool. In this paper we are going to provide a mathematical solution and smart contract function for addition of liquidity in a pool using a single token. The solution will be highly optimized and will be tested in the popular DeX Uniswap.