FreeSwap protocol conclusion

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Based on the "constant-product invariant" formula, FreeSwap creates two one-way exchange sub-pools for each pair of tokens. One-way exchange will cause the token prices of two sub-pools to slide in opposite direction. When the the price slippage reaches the preset threshold, the two-pools will exchange with each other internally and automatically for arbitrage. This arbitrage could provide revenue for the liquidity providers, and also smooth the price deviation of two sub-pools.

The arbitrage mechanism of the FreeSwap protocol can maximize the profit for the two sub-pools at the same time, which ensures fairness and achieves a win-win situation. Calculations show that if arbitrage is performed when the price deviation of the sub-pools reaches 1 % , FreeSwap's arbitrage mechanism can achieve the profit equivalent to charge 2.488 ‰ of exchange fees while charging no fees at all.

By implementing a completely free decentralized exchange protocol，it is expectable that FreeSwap can help attract more and more users to join in decentralized exchange and take part in more and more Defi activities.