Tokenik Labs: The company which developed the Tokenik DEX Protocol, along with the web interface.
The Tokenik Protocol: A suite of persistent, non-upgradable smart contracts that together create an automated market maker, a protocol that facilitates peer-to-peer market making and swapping of ERC-20 tokens on the Ethereum blockchain.
The Tokenik Interface: A web interface that allows for easy interaction with the Tokenik protocol.
The following is a brief overview of the Tokenik protocol.
Tokenik is an automated liquidity protocol powered by a constant product formula derived by a price impact and implemented in a system of non-upgradeable smart contracts on the Ethereum blockchain. It obviates the need for trusted intermediaries, prioritizing decentralization, censorship resistance, and security.
Tokenik aims to become a one-stop multi-Dapp platform that rewards users, projects, and liquidity providers by creating the world’s first Reward Farming DEX with cash incentives with DeFi suite of apps under a single brand, with excellent user support. Think CEX features but decentralized.
Each Tokenik smart contract, or pair, manages a liquidity pool made up of reserves of two ERC-20 tokens.
Anyone can become a liquidity provider (LP) for a pool by depositing an equivalent value of each underlying token in return for pool tokens. These tokens track pro-rata LP shares of the total reserves, and can be redeemed for the underlying assets at any time.
Pairs act as automated market makers, standing ready to accept one token for the other as long as the “constant product” formula is preserved. This formula, most simply expressed as x * y = k, states that trades must not change the product (k) of a pair’s reserve balances (x and y). Because k remains unchanged from the reference frame of a trade, it is often referred to as the invariant.
This formula has the desirable property that larger trades (relative to reserves) execute at exponentially worse rates than smaller ones. This is further enforced by Tokenik’s proprietary price impact algorithm applied on top of the constant product formula which has the side effect (benefit) of generating higher trading fees for liquidity providers.
In practice, Tokenik applies a 0.30% fee, as well as a price impact valuation to trades that is paid to liquidity providers, the NIK token holders and Tokenik Labs.