Monotone

This repository aims at creating a backing dex, an AMM where the swap function is strictly monotonic: the price of the token vs the numeraire is always positive, constant or increasing but never decreasing. This essentially ensures that regardless of how many people swap their token, the price is fixed and is based on the ratio between the token circulating supply and the pool numeraire balance.

To make an example, let's imagine the pool contains 1000 DAI as numeraire and the token is TKN, held by Alice (10 TKN), Bob (80 TKN) and Alice (10 TKN). The price of 1 TKN is 10 DAI (1000/100) and it will remain so regardless of how many people swap their TKN for DAI or viceversa.

Use Cases

This dex is particularly useful when combining stablecoins and synthetic assets or rwa, as it allows the creation for a consistent backing that supports the price of the main token. Arbitrageurs can then use this dex to swap the main token for the numeraire and viceversa, ensuring that the price of the main token is always backed by the numeraire on other dexes.

An example are ETF-like tokens where the value of the token is backed by fee-earning assets so that the minimum price properly respects the fees accrued.

Architecture

The dex is made of a single monolithic smart contract, the router, that acts as a singleton and manages the liquidity pools. The router is the only contract that can interact with the pools, while users can only interact with the router. This is done to save gas (approximately 60% compared to pool-based dexes) and to keep a minimal attack surface.

Incentive System

One of the innovative aspects of this contract is its use of a points system to reward users leveraging Mode's SFS. These points are earned based on the users' interactions with the contract, particularly through the computational resources (or gas) they expend.

How to run it

The project is deployed on both Sepolia and Mode testnet and uses mock tokens:

Mode

Router 0x8430490531cF86Db1580fA9CcBFCECd06BCd7DF9
MLINK 0x7563943E99CCf404CDBeFDD98ddE91DC52b08836
MUSD 0x87F3D0d1Ea8781b01Ae4e2bF99aCe343804122F3

Sepolia

Router 0x71b6e127d9DD6060d3C229E783A99a9F656baEb4
LINK 0x1dE9993Be1Fe26712b2C2ade4a3bA7E044591E90
NUSD 0xB1282B067a4D355aa4Ad6D1C7E94a788A9420eC3

Contracts

Install foundry if you don't have it already:

curl -L https://foundry.paradigm.xyz | bash

Then run the tests:

forge install
forge build
forge test

Or, to view the callstack:

forge test -vvvv

Frontend

Install dependencies and start the frontend:

npm install
npm run dev