Market Maker

Sienna’s Automated Market Maker (AMM) is a balance principle market maker. Instead of running an order book with bids and asks, which have to match and delay trades and makes them expensive to execute, Sienna Swap requires liquidity providers to deposit both tokens from a given pair.

The dual deposit system is the foundation for a balanced approach that makes it possible to trade without delay as the buyer is always present and there is no need for a matching bid as we know it from an order book principle.

Sienna Swap is based on a simple principle and math.**The formula is:**

X * Y=C

The platform automatically finds the constant (C) by finding the common denominator from X and Y.

An example for finding the constant (C) from a pair of sETH (X) and sDAI (Y): Currently, as we write this, the prices are USD 1,300 (X) and USD 1 (Y). For the equation to align, we will do the simple maths.

1,300 * 1 = 1,300

Therefore, USD 1,300 is our swap price.

This example is easy to understand because DAI is a stable coin that is soft pegged 1:1 with the US Dollar so it will always be close to 1 USD. The concept is, however, similar when it comes to other tokens with different values.

Swapping comes with the *de facto *standard price of decentralized exchanges, which is 0.30%, constituted of 0.28% is for the liquidity providers and 0.02% is automatically converted into SIENNA tokens and burned in order to reduce the total SIENNA supply.

This means that the more people use Sienna Swap, the more the SIENNA governance token will appreciate in value. It also means Sienna is not taking any commission on the trades.

Learn more about Sienna Swap