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Tokenomics
Core Concept
MilkywayEx is an open-source automated market maker protocol that provides an interface for the seamless exchange of BSC-based Tokens and MILKY.
Unlike other protocols, MilkywayEx is a fully decentralized protocol governed by the vote of the LP holders, who benefit from baking rewards. The Constant Product formula is used for price calculations and the profit share is based on the proportional account liquidity contribution.
The solution is driven by the principles of security, decentralization, and scalability. This solution serves both as a standalone project and an indispensable tool for future solutions developed on the BSC blockchain.
According to the Simplicity Principle, the core consists of two contract types: factories and pairs. A factory is used to deploy and register new arbitrary pairs made by any user. A pair (also known as DEX) is responsible for trading operations, liquidity and baker delegation management related to the only MILKY-BNB token exchange pair. Pairs are the most utilized components in the protocol ecosystem.
Anyone can become a liquidity provider for a pool by depositing equivalent values of each underlying token in return for pool tokens of the same standard of the deposited MILKY token. These tokens track the LP shares of the total reserves and can be redeemed for the underlying assets at any time. Shares play a key role in pair governance. They enable voting for the baker, or against the current malicious delegate, through the freezing of LP tokens, which can be unfrozen at the user’s will. All collected baking rewards are distributed proportionally between LP token-holders, according to the amount and duration of their holdings.
BSC protocol is based on the “Constant Product” formula:
x * y = k where x and y are reserve balances and k is the invariant that remains unchanged during the trading operation. The formula determines the exchange price which, thereafter, is slightly affected by fee charges. The collected fees are distributed proportionally between LP holders according to the number of shares they hold in the pool.The price isn't set by any external resource, it is controlled by the market itself. The difference in price relative to the external market creates an incentive for arbitrageurs to trade. These trades ultimately eliminate the price difference.
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