How KulaSwap works Alpha

the market logic, in plain terms · testnet

1. There's no order book — a formula is the market

Each pool holds two tokens. Call the amounts x and y. The whole rule is:

x · y = k

The price is just the ratio of the two reserves. A pool with 1,000 PRANA and 100 KULA prices 1 KULA at 10 PRANA. Nobody quotes a price — the formula does.

2. A swap walks the curve (slippage)

Put PRANA in, take KULA out — the contract gives you whatever keeps x·y at least k. As you buy KULA it gets scarcer in the pool, so its price rises as you buy. The bigger your trade versus the pool size, the worse your rate. That's price impact / slippage. A 0.30% fee on each swap stays in the pool — that's what pays liquidity providers.

3. Who makes money — and by what mechanism

Liquidity providers

Deposit both tokens, receive the pool's PoL liquidity token, earn a share of the 0.30% fees. Their cost is impermanent loss (if the price moves a lot, holding would've been better).

Arbitrageurs — the mechanism built into the curve

Because price is only the reserve ratio, the moment the pool's price differs from the real price anywhere else, the curve hands a profit to whoever trades in to fix it. Buy the cheap side from the pool, sell at the true price, keep the spread — and that very act pushes the pool back to the correct price. This profit isn't added by us; it's a structural output of x·y=k. It's how the pool stays honest.

Flash swaps — borrow with zero capital

The pool sends you the tokens first and only checks x·y=k at the end of the transaction. So you can borrow up to the whole reserve, do an arbitrage or a liquidation, and repay (plus the 0.30% fee) in the same transaction. If you can't repay, the whole thing reverts — so no collateral is needed.

4. The three tokens (each has one honest job)

PoLProof-of-Liquidity — the liquidity token. What you hold for providing to pools.

KULAThe rewards token — paid to PRANA miners (AI-work + hashing) and farm earners. Burn other tokens at the Burn Mine to mint it.

SHELLSThe governance + boost token — lock it to boost your yield and vote on where emissions go.

5. Different AMM models = different curve shapes

Model	What's different
KulaSwap (Uniswap V2)	Plain `x·y=k`; robust; liquidity spread across all prices.
Uniswap V3	Liquidity concentrated in a price range → more fees per dollar, but active management.
Curve / StableSwap	Flatter curve for ~1:1 pairs → tiny slippage; holds a peg.
Balancer	Weighted multi-token pools → self-rebalancing index fund.
DODO	Curve anchored to an oracle price → mimics a real order book.

KulaSwap starts as V2, runs a StableSwap pool for the peg, and is planned to graduate to "V4 hooks" — many pool types at one venue.

6. Non-custodial

Your keys never leave your wallet. KulaSwap routes your swap through the on-chain Router; you approve and confirm every transaction yourself. The pool only ever holds the liquidity people deposit.

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