Decentralized Exchange Smart Contract

A robust and secure smart contract implementation for a decentralized exchange (DEX) built on the Stacks blockchain. This contract enables atomic swaps between tokens using automated liquidity pools, following the constant product market maker model.

Features

• Automated Market Making: Implements constant product market maker (CPMM) model
• Liquidity Pools: Support for creating and managing token pair liquidity pools
• Atomic Swaps: Direct token-to-token exchanges with guaranteed execution
• Governance Controls: Emergency shutdown and protocol management capabilities
• Fee Mechanism: Built-in protocol fee structure (0.3%)
• Price Oracle Integration: Support for external price feeds and cumulative price tracking
• Slippage Protection: Configurable minimum output for trades

Technical Specifications

Constants

• Protocol Fee: 0.3% (3/1000)
• Minimum Liquidity: 1000 units
• Precision: 6 decimal places (1,000,000)

Error Codes

ERR-NOT-AUTHORIZED (u100)
ERR-POOL-EXISTS (u101)
ERR-NO-POOL (u102)
ERR-INSUFFICIENT-LIQUIDITY (u103)
ERR-SLIPPAGE-TOO-HIGH (u104)
ERR-INVALID-PAIR (u105)
ERR-ZERO-AMOUNT (u106)
ERR-DEADLINE-PASSED (u107)
ERR-TRANSFER-FAILED (u108)

Core Functions

Pool Management

create-pool

Creates a new liquidity pool for a token pair.

(define-public (create-pool (token-x principal) (token-y principal))

add-liquidity

Adds liquidity to an existing pool.

(define-public (add-liquidity
    (token-x <ft-trait>)
    (token-y <ft-trait>)
    (amount-x uint)
    (amount-y uint)
    (min-shares uint)
    (deadline uint))

Trading

swap-exact-tokens

Executes a token swap with exact input amount.

(define-public (swap-exact-tokens
    (token-in <ft-trait>)
    (token-out <ft-trait>)
    (amount-in uint)
    (min-amount-out uint)
    (deadline uint))

Read-Only Functions

• get-pool-details: Retrieves detailed information about a specific pool
• get-reserves: Gets current reserve amounts for a token pair
• get-provider-shares: Returns liquidity provider share information

Governance Functions

• set-emergency-shutdown: Enables/disables emergency shutdown mode
• set-governance-token: Sets the contract's governance token

Security Features

1. Deadline Protection: All transactions include a deadline parameter to prevent stale executions
2. Slippage Controls: Minimum output amounts can be specified for trades
3. Emergency Shutdown: Governance can pause trading in case of emergencies
4. Access Controls: Critical functions restricted to contract owner
5. Integer Math: Uses precise integer arithmetic to prevent rounding errors

Price Calculation

The contract uses the constant product formula (x * y = k) for price calculation:

• Swap amounts are calculated using: amount_out = (input_amount * output_reserve) / (input_reserve + input_amount)
• A 0.3% protocol fee is deducted from each trade
• Price impact is automatically calculated based on pool reserves

Liquidity Provider Mechanics

• Initial liquidity providers receive shares based on the geometric mean of deposited amounts
• Subsequent providers receive shares proportional to their contribution relative to existing reserves
• Minimum liquidity requirement prevents manipulation of small pools

Token Standard

The contract implements the SIP-010 fungible token standard trait, ensuring compatibility with all compliant tokens on the Stacks blockchain.

Usage Examples

Creating a Pool

(contract-call? .decentralized-exchange create-pool token-x-principal token-y-principal)

Adding Liquidity

(contract-call? .decentralized-exchange add-liquidity
    token-x-contract
    token-y-contract
    u1000000
    u1000000
    u900000
    u100)

Executing a Swap

(contract-call? .decentralized-exchange swap-exact-tokens
    token-in-contract
    token-out-contract
    u1000000
    u950000
    u100)

Development and Testing

The contract can be tested using the Clarinet console:

1. Install Clarinet
2. Run clarinet console in the project directory
3. Use the provided contract calls to interact with the DEX

Security Considerations

1. Frontrunning Protection: Use appropriate slippage tolerances and deadlines
2. Price Manipulation: Large trades should be split to minimize price impact
3. Pool Initialization: Initial liquidity should be substantial to prevent manipulation
4. Emergency Procedures: Monitor for unusual activity and utilize emergency shutdown if needed