The AMM

Legato features a decentralized exchange (DEX) specifically designed for trading between vault tokens generated within the system and other assets like USDC or SUI.

This offers several key benefits of:

• Easy Entry and Exit - The DEX allows users to easily enter and exit various DeFi strategies offered by the vaults. They can simply buy or sell the corresponding vault tokens on the exchange.

• Flexibility - The DEX offers a high degree of flexibility, allowing users to choose from a variety of liquid vault tokens representing different DeFi strategies tailored to their goals.

• Decentralized - Legato's exchange operates without a central authority. This fosters trust and transparency within the system, as users maintain complete control over their assets.

Legato's decentralized exchange is based on two subsystems.

• AMM - This is the primary subsystem for trading vault tokens, based on an automated market maker (AMM) model. Liquidity providers deposit equal values of two different tokens into liquidity pools, ensuring there is always a readily available pool for anyone to tokens at any time.

• Orderbook - The orderbook system acts as a secondary subsystem that doesn't require upfront liquidity. Market makers may list any other tokens that have demand, providing vault token holders with options for trading.

The current AMM uses the constant product formula k = x * y, which was forked from OmniBTC's Sui AMM Swap that removing fee-related functions.

We're working towards a new AMM module that is more suitable for our vault tokens and requires less liquidity to operate. Since there will be many more vault tokens issued per year.