PumpaNomics

How PumpaNomics Works PumpaNomics uses the Constant Product Formula, which is the basis for many decentralized exchanges like Uniswap V2 and their forks. Here's how it works: Liquidity Pool: The pool contains two tokens, each representing half of the total liquidity value. Constant Product: The product of the two token quantities always remains constant k = x * y. Price Impact: Adding one token to the pool (buy pressure) increases x and decreases y to maintain the constant k. Price Calculation: The price is determined by the ratio of the two tokens Price = y / x. Price Increase: As x increases and y decreases, the price of the token being bought rises. PumpaNomics Accuracy: For more realistic results, PumpaNomics uses combined liquidity across all onchain pools in its calculations, accounting for factors like arbitrage and market depth. Key Insight: The constant product formula exhibits a quadratic relationship between liquidity and price. Doubling the liquidity (100% increase) results in a 4X price increase. This quadratic nature means that price changes are more dramatic than linear relationships. Here's why: Initial state: x = y = √k After doubling x: new_x = 2√k, new_y = k/(2√k) = √k/2 New price ratio: (√k/2) / (2√k) = 1/4 of the original ratio This means the price of the token being bought is now 4 times higher