Virtual Automated Market Maker (vAMM)
Virtual Automated Market Makers (vAMMs) ensure on-chain liquidity and aim to address liquidity difficulties, typically encountered by decentralized exchanges(DEXs) and derivative protocols.
Virtual Automated Market Makers (vAMMs) ensure on-chain liquidity and aim to address liquidity difficulties typically encountered by decentralized exchanges(DEXs) and derivative protocols.
Primarily fxdx's vAMMs use the constant-product curve(x*y = k, similar to an AMM) for price discovery, which is used to handle leverage and shorts. The prices of derivatives are automatically set by vAMM with a constant output curve and spread. The vAMMs aim to use the price difference to offset potential losses, thereby maintaining market neutrality.
vAMM with Virtual Assets(In Short 2 numbers(X,Y))
There is no real asset pool(k) held within the vAMM. All collateral is kept inside the smart contract vault.
Unique features of fxdx's vAMM
  • 100% AMM based to achieve composability, capital efficiency and continuity
  • No liquidity providers needed
  • Periodic price alignment
  • Ability to manage slippage
Unlike standard AMMs used for spot trading, fxdx uses a vAMM as a price discovery tool. Traders use collateral to open long or short positions for a given asset. The vAMM calculates the entry or exit price every time a trade is made, much like any standard AMM protocol. Traders on the fxdx protocol always arrive and leave both with USDC. This allows the protocol to function even if the underlying asset has never been held.
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