Hybrid AMM + CLMM

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.

Trading Mechanics

• Price Determination: The relative value of assets changes continuously during a swap, causing the final execution price to fall between the starting and ending price. This dynamic ensures that the pool always has liquidity for trades.

• Price Impact and Slippage: Xebra’s interface provides real-time price impact estimates, including warnings for unusually high impacts. Users can set slippage tolerance levels to protect against unfavorable price changes during transaction processing.

• Fees and Rewards: Trading fees are distributed to liquidity providers, incentivizing them to keep their assets in the pool and maintain liquidity. Given testnet, trading fees and rewards are currently zero.

• Impermanent Loss: LPs should be aware of the potential for impermanent loss, which is the difference between holding tokens in an AMM versus holding them in a wallet. This risk arises from the price volatility of the pooled assets.