Intro to Liquidity Pools Structure on VirtuSwap

VirtuSwap uses a new type of Automated Market Maker (AMM) approach to organize the protocol liquidity and tokens prices.

On VirtuSwap, each pool is composed of two main assets as in traditional AMM DEXes, but can additionally hold a predetermined set of external assets as pool reserves. The cumulative amount of external assets is limited in scope (value compared to pool size; and only for a limited amount of time) to protect liquidity providers from excessive risks associated with various assets being held in pool reserves.

The list of allowed assets as Virtual Reserves is subject to the discretion of VirtuSwap DAO, via proposals to whitelist or blacklist tokens from the Allowed Virtual Reserve list.

This structure eliminates the need for costly indirect trades, by allowing the liquidity pools to hold for a limited time and scope non-native tokens that have limited liquidity. After the trade is completed, the liquidity pools trade their reserve tokens with corresponding pools.

While the pool can hold non-native tokens for a limited scope, providing liquidity is done just like any other AMM-based DEX - by staking the Native tokens to the pool you wish to provide liquidity to.

See next pages for instructions on how to provide and withdraw liquidity.