Duo Liquidity Pool
Completion of Bonding Curve
Bitdealer employs a duo liquidity pool model for each Real-World Asset (RWA) token that graduated the bonding curve.
How it works
At deployment 50% of SOL and RWA tokens are deposited into Pool 1. The other 50% of SOL that was raised is converted into BIT (bought from the Market on DEX) and then deployed equally with 50% BIT and RWA into Pool 2, establishing initial liquidity and setting the starting price based on the deposited ratios. Traders can then swap tokens within these pools, and the AMM adjusts prices automatically. For instance, if SOL’s price rises externally, traders swap SOL for RWA in Pool 1, increasing SOL and decreasing RWA, while arbitrageurs buy RWA from Pool 1 and sell it for BIT in Pool 2, balancing prices across pools. This process is mirrored for BIT price increases or RWA price changes, ensuring continuous liquidity and price stability. LPs earn trading fees (e.g., 0.25% per trade) proportional to their pool share, incentivizing further liquidity provisioning.
Why Bitdealers uses a Duo Liquidity Pool model
Enhanced Arbitrage Opportunities: Two pools enable arbitrageurs to exploit price discrepancies between SOL/RWA and BIT/RWA, ensuring RWA token prices align with market values. A single pool (e.g., only SOL/RWA) would rely on slower external arbitrage, risking price misalignment.
Improved Price Efficiency: Dual pools reflect market dynamics in both SOL and BIT ecosystems, reducing slippage and maintaining accurate RWA pricing compared to a single pool, which might lag behind external markets.
Liquidity Diversity: Offering two pools attracts LPs with different assets (SOL or BIT), increasing total liquidity and reducing trade slippage. A single pool limits liquidity to one asset pair, potentially deterring providers.
Trading Flexibility: Traders can swap RWA with either SOL or BIT directly, broadening accessibility. A single pool restricts trading to one asset, requiring external conversions (e.g., BIT to SOL), which incur fees.
Resilience to Market Shocks: Dual pools mitigate volatility in one market (e.g., SOL) by providing an alternative trading route (BIT/RWA), stabilizing RWA liquidity. A single pool is vulnerable to shocks in its paired asset.
By deploying each RWA token with a duo liquidity pool model, Bitdealer ensures robust liquidity, efficient pricing, and a resilient trading ecosystem, making RWA tokens more accessible and stable for DeFi users.
Price changes impact
Two liquidity pools operate as Automated Market Makers (AMMs) with the constant product formula x * y = k:
Pool 1: SOL <-> RWA
Pool 2: BIT <-> RWA
In each pool, x and y represent the quantities of the two tokens, and k is a constant. This formula ensures that the price (token ratio, e.g., SOL/RWA = SOL_amount / RWA_amount) adjusts dynamically as traders swap tokens. External price changes in SOL, BIT, or RWA drive trader and arbitrageur actions, rebalancing token amounts.Having two pools (SOL/RWA and BIT/RWA) is superior to a single pool (e.g., only SOL/RWA or BIT/RWA) due to enhanced arbitrage opportunities, improved price efficiency, liquidity diversity, and greater trading flexibility. This section explains the dynamics of these pools and why two pools outperform a single pool, with visualizations to illustrate key concepts.Key ScenariosWe analyze three scenarios to understand how price changes affect the pools: (1) SOL price increases, (2) BIT price increases, and (3) RWA price changes (up or down). Each scenario details trader behavior, arbitrage effects, and changes in token amounts. 1. SOL Price Increases Externally
Trader Behavior: SOL rises in value (e.g., on centralized exchanges). Traders see RWA as cheaper in SOL terms and swap SOL for RWA in Pool 1.
Pool 1 Effects:
SOL amount increases (traders deposit SOL).
RWA amount decreases (traders withdraw RWA).
RWA price in SOL terms rises (SOL/RWA increases).
Arbitrage Effects: RWA becomes cheaper in Pool 1 than in Pool 2. Arbitrageurs buy RWA in Pool 1 and sell it for BIT in Pool 2, aligning RWA prices across pools.
Pool 2 Effects:
RWA amount increases (arbitrageurs deposit RWA).
BIT amount decreases (arbitrageurs withdraw BIT).
2. BIT Price Increases Externally
Trader Behavior: BIT rises in value. Traders swap BIT for RWA in Pool 2, as RWA appears cheaper in BIT terms.
Pool 2 Effects:
BIT amount increases (traders deposit BIT).
RWA amount decreases (traders withdraw RWA).
RWA price in BIT terms rises (BIT/RWA increases).
Arbitrage Effects: RWA becomes cheaper in Pool 2. Arbitrageurs buy RWA in Pool 2 and sell it for SOL in Pool 1.
Pool 1 Effects:
RWA amount increases (arbitrageurs deposit RWA).
SOL amount decreases (arbitrageurs withdraw SOL).
3. RWA Price Changes Externally
RWA Price Up:
Trader Behavior: RWA rises in value. Traders buy RWA, depositing SOL (Pool 1) and BIT (Pool 2).
Pool Effects:
Pool 1: SOL amount increases, RWA amount decreases.
Pool 2: BIT amount increases, RWA amount decreases.
RWA price rises in both pools (SOL/RWA increases, BIT/RWA increases).
Arbitrage: Minimal, as RWA price changes are uniform across pools.
RWA Price Down:
Trader Behavior: RWA falls in value. Traders sell RWA, withdrawing SOL (Pool 1) and BIT (Pool 2).
Pool Effects:
Pool 1: RWA amount increases, SOL amount decreases.
Pool 2: RWA amount increases, BIT amount decreases.
RWA price falls in both pools (SOL/RWA decreases, BIT/RWA decreases).
Arbitrage: Minimal, as price changes are consistent.
Summary Table
PriceChange
Pool
TokenAmount↑
TokenAmount↓
SOLPrice↑
SOL/RWA
SOL
RWA
BIT/RWA
RWA
BIT
BITPrice↑
BIT/RWA
BIT
RWA
SOL/RWA
RWA
SOL
RWAPrice↑
SOL/RWA
SOL
RWA
BIT/RWA
BIT
RWA
RWAPrice↓
SOL/RWA
RWA
SOL
BIT/RWA
RWA
BIT
Key Insights
Dynamic Rebalancing: Traders’ swaps adjust token amounts, maintaining x * y = k. The pool’s price reflects supply and demand.
Arbitrage Efficiency: Two pools enable faster price alignment via arbitrage, unlike a single pool reliant on external markets.
Liquidity and Flexibility: Multiple pools attract diverse liquidity and support varied trading needs, enhancing system robustness.
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