vAMM
Inspired by Perpetual Protocol's V2 system design, Increment implements a similar architecture with collateral backed pooled virtual (ie. synthetic) assets and Curve V2’s CryptoSwap AMM as the trading engine - this combination is also known as the virtual Automated Market Marker (vAMM). Compared to the traditional order book model, the Increment vAMM trades peer-to-pool where liquidity can be provided by anyone in a passive manner. And compared to oracle-based models which derive pricing from off-chain centralized exchanges, Increment perpetual markets uses Curve math's algorithmic computations to facilitate its own market pricing that only moves when trading and liquidity provision positions are opened or closed.
- The liquidity used by the AMM is virtual but is backed by real assets. Liquidity providers (LPs) deposit funds for each market, then the system mints the equivalent virtual assets in the vBase and vQuote contract pools. Liquidity providers receive trading fees in exchange for taking the opposite side of all trades; this is a passive LP experience, contrasting actively managed market making strategies. For a precise step-by-step flow on how this works, please see the Liquidity Provision guide.
- Traders can utilize margin (ie. collateral) to open long or short positions with leverage for a given market. The notional amount of the opened position is minted in virtual tokens and then exchanged with the corresponding pool depending on whether it is a long or a short. For instance, if you are opening a long position in the ETHUSD pair that means you have the expectation that the underlying asset (ie. ETH) will rise in value in the future, thus the notional amount in vUSD will be exchanged for vETH from the vETH pool. Traders can also use leverage to increase buying power by minting additional virtual assets on top of provided collateral when trading with the vAMM. For a precise step-by-step flow on how this works, please see the Long/Short Trading guide.
All algorithmic computation is completed under the hood through Curve V2's contracts and Curve V2's AMM math, more details can be found in Curve's whitepaper.
Last modified 2mo ago