Simple Automated Market Maker (AMM) on Solana

Summary

This project is a basic implementation of an Automated Market Maker (AMM) smart contract using Rust and the Solana Program Library (SPL). The contract allows users to create and manage a liquidity pool for two tokens, enabling liquidity providers to add or remove liquidity and traders to swap between the tokens. The AMM operates using the constant product formula (x * y = k) and includes a simple fee mechanism to incentivize liquidity providers.

Features

• Liquidity Pool Creation: Users can create a new liquidity pool with two tokens.
• Add Liquidity: Liquidity providers can add specified amounts of the two tokens to the pool.
• Remove Liquidity: Liquidity providers can remove their share of liquidity from the pool.
• Token Swaps: Users can swap between the two tokens in the pool using the constant product formula.
• Fee Mechanism: A 0.3% fee is applied to all swaps, benefiting liquidity providers.
• Fee Management: The fee recipient and fee amount can be updated by authorized users.
• Basic Error Handling: Includes validation for input amounts and pool conditions.
• Upgradeable Parameters: The fee recipient address and fee amount are updatable.

Assumptions and Limitations

• No Price Oracle Integration: This implementation does not include a price oracle, meaning it does not track external market prices or adjust prices accordingly.
• No Frontend: A frontend is not included, but includes basic CLI tool to interact with the contract.
• Single Pool Support: This implementation is designed for a single liquidity pool. Supporting multiple pools or more complex pool configurations would require additional development.
• Basic Error Handling: While basic error handling is implemented, more comprehensive validation could be added for production use.
• Constant Product Formula: The AMM uses the constant product formula for price determination, which may not be suitable for all types of assets, especially those with low liquidity.

Prerequisites

Anchor: This project is built with Anchor so visit Anchor official installation page and install all necessary modules.

Build, Test and Deploy

First, install dependencies:

$ yarn

Next, we will build and deploy the program via Anchor.

Build the program:

$ anchor build

Let's deploy the program.

$ anchor deploy

Finally, run the test:

$ anchor test