blockchain – Methods to calculate how a sure transaction impacts a token worth?

16 views 8:29 am 0 Comments February 28, 2024


Methods to Calculate Token Value Impression of Giant Trades in Decentralized Finance (DeFi) Environments

I’m creating a device to investigate the affect of huge trades on token costs inside a Decentralized Change (DEX) atmosphere, particularly on the Polygon community utilizing the Quickswap Router contract as a case examine. My purpose is to programmatically estimate the value motion attributable to vital transactions.

Situation:

Assume we’re observing the Polygon mempool for transactions directed in direction of the Quickswap Router contract. We detect a transaction swapping a considerable quantity of a stablecoin (denoted as S) for a token (denoted as R). The transaction particulars are as follows: $34,000 of S is exchanged for R tokens priced at $7.21 every. Ignoring transaction charges, this equates to buying roughly 4,715.67 R tokens.

Goal:

I need to calculate the post-transaction worth of R within the state of affairs the place the liquidity pool’s preliminary state is as follows:

  • Liquidity Pool Dimension (Preliminary): 100,000 R and 721,000 S (indicating a 1R = 7.21S or $7.21 worth per R token).
  • Order Dimension: $34,000 price of S to purchase R.
  • Present R Value: $7.21 per R.

Strategy:

I used the Fixed Product Market Maker (CPMM) mannequin for simplicity, excluding components like slippage tolerance and buying and selling quantity from the calculation. The method is:

  1. Calculate the Variety of R Tokens Purchased: Divide the order measurement by the present R worth.
  2. Replace the Liquidity Pool: Subtract the R tokens purchased from the pool and add the S spent.
  3. Calculate the New Value of R: Decide the brand new worth primarily based on the up to date liquidity pool ratio.

Calculation:

After executing the commerce, the liquidity pool is adjusted, and the brand new worth of R is calculated. Nonetheless, I am searching for suggestions on this method and any recommendations for extra correct or environment friendly strategies to estimate the value affect of huge trades in DeFi settings.

Does anybody have insights or enhancements to supply on this calculation methodology? Any recommendation or various methods can be tremendously appreciated.

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