APR Calculations

📈 Let's Understand XDEX APR Calculations

XDEX leverages the Constant Product Market Maker (CPMM) model to ensure liquidity is uniformly distributed across all price ranges. This design simplifies both trading and APR calculations, benefiting both traders and liquidity providers by creating a straightforward and efficient system for rewards.

📘 Definition

APR (Annual Percentage Rate) reflects the potential earnings for liquidity providers, based on the trading fees generated by a pool over a given time period.

📌 Assumptions

🔹 Trading fees are distributed proportionally among all LPs.
🔹 Liquidity is evenly spread across all price points (a core property of CPMM pools).

🧮 APR Formula

APR = ( Total Trading Fees / Total Liquidity Value ) × 100

Where:

🔹 Total Trading Fees = Cumulative fees earned by the pool over a selected timeframe (e.g., daily, monthly, yearly) 🔹 Total Liquidity Value = Combined USD value of all assets deposited in the pool

📊 Example Calculation

Let’s say the pool earns $10,000 in trading fees over the course of one year, and the total liquidity value in the pool is $100,000:

APR = (10,000 / 100,000) × 100 = 10%

This means liquidity providers could expect a 10% APR based solely on trading fees, assuming their position remains constant.

🧩 XDEX-Specific Considerations

🔹 Uniform Liquidity Distribution

CPMM ensures liquidity is always available across all price points — no manual rebalancing or range-setting required.

🔹 Transparent Fee Structure

84% of the 0.25% trading fee is returned directly to LPs, ensuring rewards scale with trading volume.

🔹 Simplified APR Estimation

Thanks to CPMM’s consistency, APR is calculated with a single, clear formula — no need for concentrated liquidity math.

✅ Benefits of XDEX’s CPMM Model for LPs

✔️ Consistent Liquidity Uninterrupted access to liquidity at any price level.

✔️ Straightforward Rewards LPs earn directly from protocol volume — no complicated staking or position management.

✔️ Transparent APR APR is simple to calculate and easy to understand, in line with XDEX’s mission of accessible, user-friendly DeFi.

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Last updated 9 months ago

hashtag📘 Definition

hashtag📌 Assumptions

hashtag🧮 APR Formula

hashtag📊 Example Calculation

hashtag🧩 XDEX-Specific Considerations

hashtag🔹 Uniform Liquidity Distribution

hashtag🔹 Transparent Fee Structure

hashtag🔹 Simplified APR Estimation

hashtag✅ Benefits of XDEX’s CPMM Model for LPs

hashtag✔️ Consistent Liquidity Uninterrupted access to liquidity at any price level.

hashtag✔️ Straightforward Rewards LPs earn directly from protocol volume — no complicated staking or position management.

hashtag✔️ Transparent APR APR is simple to calculate and easy to understand, in line with XDEX’s mission of accessible, user-friendly DeFi.