🔁Swap

Swap

The Swap tab, is where you can trade one token for another. It is a user-friendly swap interface, just select the two tokens you wish to exchange.

The liquidity provided comes from Liquidity Providers (LPs) who stake their tokens in the associated 'Pools'. In exchange, they get LP (Liquidity Provider) tokens, which can also be staked to earn REF and other tokens in the 'Farms'.

When you trade (swap) on Sonic Finance you will pay the pool fee (trading fee), which is broken down as follows:

Example

Assume $A$ = 0.05, $r_x$ = 80% and $r_y$ = 150%. We have

If we reverse the direction, swap from token y to token x. We have

$$exchang\ rate = \frac{1 + \frac{0.05}{1.5^2}}{1 + \frac{0.05}{0.8^2}} \approx 0.95$$

Incentives for convergence of coverage ratio

Sonic Finance incentivizes a swap if the coverage ratio of two tokens is converged, and penalizes if diverges as shown in the above example. It helps keeping the pool in a healthy state and prevent a token from being default.