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Exchange Rate → Liquidity Pools

How does liquidity work?

Exchange Rate → Liquidity Pools

The exchange rate for any City is represented in the below equations:

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The Exchange rate is the “price” where Traders AND LPs will swap Liquidity Tokens for USDC and vice versa.

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Increases Exchange Rate

⬆️ Trading Fee Paid into Pool

⬆️ Pool Impact Fee Paid into Pool

⬆️ Funding Fee/Rebate Paid into Pool

⬆️ Negative Trader P&L – Trader Losses

Decreases Exchange Rate

⬇️ Funding Fee/Rebate Paid to Trader

⬇️ Positive Trader P&L – Trader Gains

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