Terms used: SD = SmartDeFi LP = Liquidity Pool fBNB = fWrapped BNB
Say you just decided to create a brand new SD token on the Binance Smart Chain network and you gave it the amazingly cool name of “COS”.
You gave it a total supply of 1000 tokens, which means now there will never be more than 1000 COS in existence. In time there will be fewer tokens in the circulating supply, because of burning tokens, but there can never be more than 1000.
To keep everything fair and transparent, you added to the LP of your token the entire supply of 1000 COS. You also added some fBNB, about 10, from your wallet to the LP of your token so that people can start buying and selling your token.
This means that now your token’s LP is made up of two things, which is 10 fBNB + 1000 COS.
Great, but what is the price of my token ?
It’s easy, the price of your token is given by the ratio of tokens inside your LP.
So to find out the current price of your token, you take the fBNB number from inside your LP and divide it to the COS number, which in your case means: 10 (fBNB) ÷ 1000 (COS) = 0.01
What does this 0.01 represent ? Well, it means that each COS token is worth 0.01 fBNB, and THAT is the price of your token.
What if I want my price for COS to be higher ?
Ok, simply add more fBNB to the LP in that case. Like we said, the price of your token is given by the ratio of fBNB to COS inside your LP.
Say instead you want the price to be 0.05 fBNB per 1 COS token, how do you find out how much fBNB you need to reach that specific price ?
Just do this: take the price you want, which is 0.05 fBNB, and multiply it with the total number of COS tokens inside the LP, which is 1000, this means that you’ll do 0.05 x 1000 = 50
So using this simple operation you just found out that you need to have 50 fBNB in your liquidity pool, in order for 1 COS to be priced at 0.05 fBNB like you wanted.
How do I add more tokens to LP ?
Couldn’t be simpler. If you want to add more COS or more fBNB to your LP, after you’ve launched the token for public trading, then you just have to manually transfer said tokens from your wallet to the COS token contract address, and that’s it.
So, in our previous example you had 10 fBNB in your LP, but then you thought the price of COS is just too low, so you now want your LP to have 50 fBNB, in order for the price to be at the level you wish.
This means that you need to manually transfer the 40 fBNB difference from your wallet to the contract address of COS, and that is all, now the price of COS is 0.05 fBNB per token, just like you wanted.
Why does price change over time ?
Remember the ratio of tokens inside LP that we talked about ? Well, that ratio changes every time someone buys or sells your tokens, which in turn affects the price.
Let’s make a quick example, where we disregard whatever custom taxes you added to your token, whatever fees FEGex may have, price impact etc, we’ll just keep it simple.
Say you have 1000 COS and 50 fBNB in your LP, and then some investor comes and buys 200 COS for 10 fBNB. This means that now your LP has in it:
1000 – 200 = 800 COS tokens
50 + 10 = 60 fBNB tokens
As you see, the tokens ratio in your LP has now changed due to this buy, which means the price of your token going forward has also changed, and it has increased. You can find out exactly how much the price is now by using the same operation from before, fBNB ÷ COS, which is:
60 ÷ 800 = 0.075 fBNB per 1 COS token
So when someone buys your token, they take COS out of the LP and put fBNB in, and when someone sells your token, they put COS into the LP and take fBNB out of it.
And that’s how the price of your SD token works.