What exactly is the QIC-AMM automatic market maker mechanism of the decentralized perpetual contract exchange YFX?
QIC-AMM (Quoted Index Price and Constant Integral Based Automatic Market Maker) is an automatic market maker trading agreement based on index price index and dynamic index. Under the agreement, the centralized index price is quoted, and traders directly quote the price with reference to the automatic market maker to complete long and short transactions. The depth of the transaction is related to the liquidity of the market capital pool. The same as DEX, why did YFX not adopt Uniswap’s classic AMM mechanism of real-time cumulative pricing formula as the index price source?
Actually, after the investigation and exploration by the YFX team, the loopholes in the pricing mechanism of AMM for financial derivatives have enabled smart creators in the market to generate risk-free arbitrage, and the introduction of the system will cause no risk.
The QIC-AMM mechanism adopted by YFX is that YFX will capture the futures prices of multiple centralized transactions to form an index price. When the user places an order, the user cutely enters the opening price, direction and direction, and the system will integrate the user’s the cost of opening a position. At the same time, the system will analyze the index price at this time and open the position information and upload the position together on the chain. Because the chain takes time, it can be based on the market dynamics within a period of time, and the price will have a certain error. When the on-chain price is within this range, the market maker will freeze a certain amount of margin from the available balance of the fund pool, which will be frozen together with the user’s opening cost to form a long-short position and also form a smart contract.
Users can add a pool of market makers, and users only need to deposit the market-making currency into the smart contract of the platform, and at the same time obtain LP-Token as a voucher. Because the available balance of the market maker pool determines the upper limit for users to open positions, YFX uses a constant integral function to use the available balance of the market maker pool to use the normal distribution function to calculate the depth when the user opens a position. The QIC-MMM mechanism adopted by YFX can not only ensure the fairness and timeliness of user transactions, but also ensure the security of the system.
