Market Liquidity

One important note on how liquidity works: Agents in the simulation may provide liquidity to the market. This is defined in the “Liquidity provision ratio”. When greater than 0, agents will seek to provide a percentage of their tokens as liquidity for the token market. Every timestep in the simulation, they will adjust their liquidity provision so that the percentage of tokens provided as liquidity matches their liquidity provision objective. This may result in adding or subtracting tokens from the liquidity pool.

This means that if an agent has a different flow of tokens besides the liquidity flow, the number of tokens that the agent provides each timestep will change over time.

To avoid complexity in the simulation, we suggest creating an entity that provides all their tokens to liquidity (that means ratio 1), acting as the market maker. If extra liquidity is supplied based on generated fees or similar, we suggest creating an agent that receives those fees, with the goal of providing tokens to the market when the fees arrive.