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:

1. Liquidity Pool: The pool contains two tokens, each representing half of the total liquidity value.
2. Constant Product: The product of the two token quantities always remains constant k = x * y.
3. Price Impact: Adding one token to the pool (buy pressure) increases x and decreases y to maintain the constant k.
4. Price Calculation: The price is determined by the ratio of the two tokens Price = y / x.
5. 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

Understanding Results: The calculator shows how an injection of capital into a liquidity pool affects the token price. The result is displayed as both a percentage increase and an "X" multiplier.

Percentage vs. Multiplier: A 200% increase means tripling the original value (3X). It's calculated as: original value + 200% of original value = 3 times the original value. Similarly, 100% increase is 2X, 300% is 4X, and so on. The multiplier is always one more than the percentage increase divided by 100.

Limitations

• No data from centralized exchanges is included in the calculations.
• The model doesn't account for potential liquidity on other blockchain networks.
• The model assumes no sell pressure during the liquidity injection, projecting price changes as if the entire amount is added without concurrent selling activity.