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Liquidity Pool (Solidity Smart Contract w/ Hardhat)

  • this is my personal implementation of decnetralized exchange using Liquidy Pool and Swaps inspired by Uniswap V2 (reference)[https://uniswap.org/blog/uniswap-v2].
  • The main difference is that my code is only meant to swap ETH with one Token (called SPC), while in Uniswap, it is possible to Swap with any number of combinations. Also, uniswap has flash swaps (for trading bots) while I opted to leave this out to reduce complexity a bit.
  • generally speaking I made the logic more verbose so it's easier to understand for me and for auditors so keep in mind that I preferred readability over gas savings.
  • I did my best to simplify uniswap concepts by writing out the constant product formulas, geometric mean, etc in an easy to read way

Main Commands (to see tests)

  • npm i
  • npx hardhat compile
  • npx hardhat test

Overview

  • in order for a decentralized exchange to work like Uniswap, we need a set of users to add/remove funds liquidity pool. They are incentivized with fees from trades (aka swaps).
  • when Liquidty Providers add liquidity, they get LP tokens to keep track of their contribution. When they want to cash in on fees from transactions and back their funds, they remove liquidty by burning tokens.
  • Once there is any liquidty, people can execute trades using swap method
  • The functionality is split into 2 contracts Router.sol and LiquidityPool.sol as was done in Uniswap. Router is supposed to be the one that interfaces with end users. It ensures that users don't un-necessarily lose money during trades. LiquidityPool is a low level contract that keeps track of the state of luqidity and funds

Technical Implementation

Router.sol (Router Contract)

for all of these functions, user needs to approve the router to send over SPC funds via ERC20 approve function

  • addLiquidity - adds liquidity. eth sent is a constant param. while spcMin, spcMax are used adjust the SPC token that should be send to LP contract to limit losses. I also used spcMin & spcMax to simplifiy the logic and not have to refund eth back to user as it seemed more messy
    • i transfer spc in the router method and sent eth via the mint LP method
  • removeLiquidity - uses liquidity token to remove liquidity. and has min spc and eth params to ensure users gets back at a rate that they are comfortable. if refunding eth and spc meet minimum requirements, then I transfer the lp token to LP contract and call the burn method
  • swap - allows to swap one asset at a time, either SPC or ETH for one another
    • if swapping ETH for SPC, eth is required to be sent it and _spcMinOut needs to be defined
      • if meets requirements I transfer ETH to LP via swap method
    • if swapping SPC for ETH, _spcIn is required to be sent it and _ethMinOut needs to be defined
      • if meets requirements I transfer spc before executing LP swap method
    • i added a bunch of checks to make sure mins are met (refer to comments in code)

Live Contract References:

Liquidty Pool Address: 0x5435f9b702a33eF6AF73803bda083dE117471e94

Router Contract address: 0x772057Eb52bE4D69D589212aA4C2D59FbE275E95

ERC 20 SPC Address: 0x48E155918808A0F26B962402B7c2566F14DdE545

LiquidityPool.sol (LP Contract)

  • all these are low level calls meant to be sent by router

  • I added warlock to limit re-entrancy attacks and generally enforced users not to send wacky numbers and did my best to prevent from users trying to mess up the liquidity numbers by having a good amount of require checks in many places

  • mint

    • on first mint event uses geometric mean
    • in subsequent executions, keeps the ratio of SPC to ETH while depositing them and issuing LP tokens to the _to address
    • updates the reserve values

  • burn

    • checks the balance of LP tokens sent to LP contract. and sends corresponding SPC and SPC to _to address
    • burns the LP tokens out of circulation
    • updates the reserve values

  • swap

    • takes 1% fee on all trades
    • uses constant product formula
    • checks with _ethIn if eth is sent in. if yes, assumes you're swapping ETH for SPC
    • if SPC for ETH, checks LP balance of SPC and compares to reserve
    • after calculations, reserves are updated and spc/eth is sent out to the _to address

Front-end

Commands for Frontend

  • cd frontend-2
  • npm install
  • npm start
  • fe should be available on http://localhost:1234/

Test Coverage

  • I spent a lot of time covering the important test cases of business
  • There are some less important require checks that are not tested like for money and eth transfers. I didn't have time to test those and I wasnt' sure how to fail a transfer or an eth trasaction very easily. and I didn't test all branches on sqrRoot method since I copied it from uniswap

Deploy Script

  • npx hardhat run --network goerli scripts/deploy.ts --show-stack-traces

Updated Settings I use Personally

  • this repo is configured with hardhat template with prettier, eslint, vscode config, tsconfig. These are mostly pre-defined by hardhat template and make it very easy to start working and deploy contracts