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Update AMM auction slot details:

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- Update with the actual min bid formula used
- Change formulas to use pseudo-code characters instead of math symbols
  which can be hard to read (for example ÷ looks like +, ⁶⁰ is small and
  hard to see, etc.)
- Update callout syntax for Redocly
- Slightly restructure auction slot section to emphasize the "why"
  first
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mDuo13
2024-05-09 16:37:53 -07:00
parent 5bfaf8094b
commit 11b909ed50
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docs/concepts/tokens/decentralized-exchange/automated-market-makers.md
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@@ -77,9 +77,11 @@ To vote, a liquidity provider sends an [AMMVote transaction][]. Whenever anyone
### Auction Slot
Unlike any previous Automated Market Makers, the XRP Ledger's AMM design has an _auction slot_ that a liquidity provider can bid on to get a discount on the trading fee for a 24-hour period. The bid must be paid in LP Tokens, which are returned to the AMM. No more than one account can hold the auction slot at a time, but the bidder can name up to 4 more accounts to also receive the discount. There is no minimum bid, but if the slot is currently occupied then you must outbid the current slot holder to displace them. If someone displaces you, you get part of your bid back depending on how much time remains. As long as you hold an active auction slot, you pay a discounted trading fee equal to 1/10 (one tenth) of the normal trading fee when making trades against that AMM.
Unlike any previous Automated Market Makers, the XRP Ledger's AMM design has an _auction slot_ that a liquidity provider can bid on to get a discount on the trading fee for a 24-hour period. The bid must be paid in LP Tokens, which are returned to the AMM. In most blockchains, when the price of an AMM's assets shifts significantly in external markets, traders can use arbitrage to profit off an AMM, which results in a loss for liquidity providers. The auction mechanism is intended to return more of that value to liquidity providers and more quickly bring the AMM's prices back into balance with external markets.
With any AMM, when the price of its assets shifts significantly in external markets, traders can use arbitrage to profit off the AMM, which results in a loss for liquidity providers. The auction mechanism is intended to return more of that value to liquidity providers and more quickly bring the AMM's prices back into balance with external markets.
No more than one account can hold the auction slot at a time, but the bidder can name up to 4 more accounts to also receive the discount. If the slot is currently occupied then you must outbid the current slot holder to displace them. If someone displaces you, you get part of your bid back depending on how much time remains. As long as you hold an active auction slot, you pay a discounted trading fee equal to 1/10 (one tenth) of the normal trading fee when making trades against that AMM.
The minimum bid to win the auction slot, if it is empty or expired, is equal to the current total number of LP Tokens outstanding multiplied by the trading fee, divided by 25. (In pseudocode, `MinBid = LPTokens * TradingFee / 25`.) If the auction slot is occupied, you must bid at least the minimum _plus_ up to 105% of what the current slot holder paid, discounted by how much time they have remaining.
## Representation in the Ledger