Liquidity pool

Introduction

This Liquidity pool interaction guide provides a practical demonstration of interacting with a liquidity pool on the Fetch.ai network. This script showcases various operations, including swapping assets, providing liquidity, and withdrawing liquidity, utilizing smart contracts and local wallets.

Walk-through

Let's start by creating a Python script for this and name it:
windows
echo. > aerial_liquidity_pool.py
Let's then import the needed modules:

aerial_liquidity_pool.py
 
import argparse
import base64
from cosmpy.aerial.client import LedgerClient, NetworkConfig
from cosmpy.aerial.contract import LedgerContract
from cosmpy.aerial.faucet import FaucetApi
from cosmpy.aerial.wallet import LocalWallet

We need to define a _parse_commandline() function:

aerial_liquidity_pool.py
 
def _parse_commandline():
    parser = argparse.ArgumentParser()
    parser.add_argument(
        "swap_amount",
        type=int,
        nargs="?",
        default=10000,
        help="atestfet swap amount to get some cw20 tokens on wallet's address",
    )
    parser.add_argument(
        "cw20_liquidity_amount",
        type=int,
        nargs="?",
        default=100,
        help="amount of cw20 tokens that will be provided to LP",
    )
    parser.add_argument(
        "native_liquidity_amount",
        type=int,
        nargs="?",
        default=2470,
        help="amount of atestfet tokens that will be provided to LP",
    )
    return parser.parse_args()

The function expects and processes three command-line arguments:

swap_amount: this argument specifies the amount of atestfet tokens to swap in order to receive some cw20 tokens on the wallet's address. It is an optional argument, and if not provided, it defaults to 10000.
cw20_liquidity_amount: this argument sets the amount of cw20 tokens that will be provided to the liquidity pool. It is also optional and defaults to 100 if not provided.
native_liquidity_amount: this argument represents the amount of atestfet tokens that will be provided to the liquidity pool. Like the others, it is optional and defaults to 2470 if not specified.

The help parameter for each argument provides a description of what it is used for. The function then uses parser.parse_args() to process the command-line arguments provided by the user and return them as an object containing the values for swap_amount, cw20_liquidity_amount, and native_liquidity_amount.

We are now ready to define our main() function, which orchestrates the interaction with a liquidity pool using the provided command-line arguments. We define it in multiple parts, as follows:

aerial_liquidity_pool.py
 
def main():
    """Run main."""
    args = _parse_commandline()
 
    # Define any wallet
    wallet = LocalWallet.generate()
 
    # Network configuration
    ledger = LedgerClient(NetworkConfig.latest_stable_testnet())
 
    # Add tokens to wallet
    faucet_api = FaucetApi(NetworkConfig.latest_stable_testnet())
    faucet_api.get_wealth(wallet.address())
 
    # Define cw20, pair and liquidity token contracts
    token_contract_address = (
        "fetch1qr8ysysnfxmqzu7cu7cq7dsq5g2r0kvkg5e2wl2fnlkqss60hcjsxtljxl"
    )
    pair_contract_address = (
        "fetch1vgnx2d46uvyxrg9pc5mktkcvkp4uflyp3j86v68pq4jxdc8j4y0s6ulf2a"
    )
    liq_token_contract_address = (
        "fetch1alzhf9yhghud3qhucdjs895f3aek2egfq44qm0mfvahkv4jukx4qd0ltxx"
    )
 
    token_contract = LedgerContract(
        path=None, client=ledger, address=token_contract_address
    )
    pair_contract = LedgerContract(
        path=None, client=ledger, address=pair_contract_address
    )
    liq_token_contract = LedgerContract(
        path=None, client=ledger, address=liq_token_contract_address
    )
 
    print("Pool (initial state): ")
    print(pair_contract.query({"pool": {}}), "\n")

It starts by calling _parse_commandline() to retrieve the command-line arguments. These arguments control various aspects of the liquidity pool interaction, like swap amounts and liquidity provision. We then create new wallet called wallet. This wallet will be used for conducting transactions. We proceed and set the network configuration to the latest stable testnet. Through the faucet_api we add tokens to the wallet. This simulates the process of acquiring tokens from an external source. We go on and define the contract addresses. In the part, addresses of three different contracts (CW20 token, pair, and liquidity token contracts) are defined. These contracts are essential for interacting with the liquidity pool. Finally we print the initial pool state. This provides an initial snapshot of the liquidity pool before any actions are taken.

aerial_liquidity_pool.py
 
    # Swap atestfet for CW20 tokens
    swap_amount = str(args.swap_amount)
    native_denom = "atestfet"
 
    tx = pair_contract.execute(
        {
            "swap": {
                "offer_asset": {
                    "info": {"native_token": {"denom": native_denom}},
                    "amount": swap_amount,
                }
            }
        },
        sender=wallet,
        funds=swap_amount + native_denom,
    )
 
    print(f"Swapping {swap_amount + native_denom} for CW20 Tokens...")
    tx.wait_to_complete()
 
    print("Pool (after swap): ")
    print(pair_contract.query({"pool": {}}), "\n")
 
    # To provide cw20 token to LP, increase your allowance first
    cw20_liquidity_amount = str(args.cw20_liquidity_amount)
    native_liquidity_amount = str(args.native_liquidity_amount)
 
    tx = token_contract.execute(
        {
            "increase_allowance": {
                "spender": pair_contract_address,
                "amount": cw20_liquidity_amount,
                "expires": {"never": {}},
            }
        },
        wallet,
    )
 
    print("Increasing Allowance...")
    tx.wait_to_complete()

In this part of the main() function, the script swaps a specified amount of atestfet tokens for CW20 tokens using the pair_contract. This is done by constructing a transaction with the "swap" operation. swap_amount is the amount of atestfet tokens to swap, retrieved from the command-line arguments. native_denom is set to "atestfet" which is the native token denomination. The transaction is executed with the execute() method, specifying the "swap" operation. The sender parameter is set to the user's wallet, and the funds parameter is set to the amount being swapped in addition to the native denomination. The script then waits for the transaction to complete, and after this, a message is printed to indicate the swap operation has occurred. Within the function, we then provide CW20 tokens to the liquidity pool. The script first increases the allowance for the pair contract to spend CW20 tokens from the user's wallet. The cw20_liquidity_amount is the amount of CW20 tokens to provide to the LP, retrieved from the command-line arguments. The native_liquidity_amount is the amount of atestfet tokens to provide to the LP, also retrieved from the command-line arguments. A transaction is created with the "increase_allowance" operation using the execute() method. The transaction specifies the spender (pair_contract_address), the amount to allow spending (cw20_liquidity_amount), and an expires parameter set to never. The script waits for the transaction to complete, and after this, a message is printed to indicate that the allowance has been increased.

aerial_liquidity_pool.py
 
    # Provide Liquidity
    # Liquidity should be added so that the slippage tolerance parameter isn't exceeded
 
    tx = pair_contract.execute(
        {
            "provide_liquidity": {
                "assets": [
                    {
                        "info": {"token": {"contract_addr": token_contract_address}},
                        "amount": cw20_liquidity_amount,
                    },
                    {
                        "info": {"native_token": {"denom": native_denom}},
                        "amount": native_liquidity_amount,
                    },
                ],
                "slippage_tolerance": "0.1",
            }
        },
        sender=wallet,
        funds=native_liquidity_amount + native_denom,
    )
 
    print(
        f"Providing {native_liquidity_amount + native_denom} and {cw20_liquidity_amount}CW20 tokens to Liquidity Pool..."
    )
    tx.wait_to_complete()
 
    print("Pool (after providing liquidity): ")
    print(pair_contract.query({"pool": {}}), "\n")
 
    # Withdraw Liquidity
    LP_token_balance = liq_token_contract.query(
        {"balance": {"address": str(wallet.address())}}
    )["balance"]
 
    withdraw_msg = '{"withdraw_liquidity": {}}'
    withdraw_msg_bytes = withdraw_msg.encode("ascii")
    withdraw_msg_base64 = base64.b64encode(withdraw_msg_bytes)
    msg = str(withdraw_msg_base64)[2:-1]
 
    tx = liq_token_contract.execute(
        {
            "send": {
                "contract": pair_contract_address,
                "amount": LP_token_balance,
                "msg": msg,
            }
        },
        sender=wallet,
    )
 
    print(f"Withdrawing {LP_token_balance} from pool's total share...")
    tx.wait_to_complete()
 
    print("Pool (after withdrawing liquidity): ")
    print(pair_contract.query({"pool": {}}), "\n")
 
 
if __name__ == "__main__":
    main()

Within the main() script we would need to provide liquidity to the pool, ensuring that the slippage tolerance parameter isn't exceeded. Liquidity is added by creating a transaction with the "provide_liquidity" operation. The assets being provided include CW20 tokens and atestfet tokens. These are specified in a list within the "assets" field of the operation. The script also sets a slippage tolerance of 0.1, meaning that the price impact of the liquidity provision must be within 10% of the expected value. The transaction is executed with execute() method, specifying the "provide_liquidity" operation. The sender parameter is set to the user's wallet, and the funds parameter includes the amount of atestfet tokens being provided. A message is printed indicating the amount of CW20 and atestfet tokens being provided to the liquidity pool.

Afterwards, the script initiates a withdrawal of liquidity from the pool. This involves creating a transaction with the "withdraw_liquidity" operation. The LP token balance is queried using query() method to determine the amount of LP tokens held by the user. A withdrawal message is constructed in JSON format and then encoded and base64-encoded to be included in the transaction. The transaction is executed with the execute(), specifying the "send" operation. The contract parameter is set to the pair contract address, the amount parameter is set to the LP token balance, and the msg parameter includes the withdrawal message. A message is printed indicating the amount of LP tokens being withdrawn from the pool. Also, the LP balance is printed after withdrawal take place.

In summary, the main function orchestrates a series of actions, simulating interactions with a liquidity pool. These actions include swapping tokens, providing liquidity, and withdrawing liquidity, and the state of the pool is printed at different stages to provide feedback to the user.

Save the script.

The overall script should be as follows:

aerial_liquidity_pool.py
 
import argparse
import base64
from cosmpy.aerial.client import LedgerClient, NetworkConfig
from cosmpy.aerial.contract import LedgerContract
from cosmpy.aerial.faucet import FaucetApi
from cosmpy.aerial.wallet import LocalWallet
 
 
def _parse_commandline():
    parser = argparse.ArgumentParser()
    parser.add_argument(
        "swap_amount",
        type=int,
        nargs="?",
        default=10000,
        help="atestfet swap amount to get some cw20 tokens on wallet's address",
    )
    parser.add_argument(
        "cw20_liquidity_amount",
        type=int,
        nargs="?",
        default=100,
        help="amount of cw20 tokens that will be provided to LP",
    )
    parser.add_argument(
        "native_liquidity_amount",
        type=int,
        nargs="?",
        default=2470,
        help="amount of atestfet tokens that will be provided to LP",
    )
    return parser.parse_args()
 
 
def main():
    """Run main."""
    args = _parse_commandline()
 
    # Define any wallet
    wallet = LocalWallet.generate()
 
    # Network configuration
    ledger = LedgerClient(NetworkConfig.latest_stable_testnet())
 
    # Add tokens to wallet
    faucet_api = FaucetApi(NetworkConfig.latest_stable_testnet())
    faucet_api.get_wealth(wallet.address())
 
    # Define cw20, pair and liquidity token contracts
    token_contract_address = (
        "fetch1qr8ysysnfxmqzu7cu7cq7dsq5g2r0kvkg5e2wl2fnlkqss60hcjsxtljxl"
    )
    pair_contract_address = (
        "fetch1vgnx2d46uvyxrg9pc5mktkcvkp4uflyp3j86v68pq4jxdc8j4y0s6ulf2a"
    )
    liq_token_contract_address = (
        "fetch1alzhf9yhghud3qhucdjs895f3aek2egfq44qm0mfvahkv4jukx4qd0ltxx"
    )
 
    token_contract = LedgerContract(
        path=None, client=ledger, address=token_contract_address
    )
    pair_contract = LedgerContract(
        path=None, client=ledger, address=pair_contract_address
    )
    liq_token_contract = LedgerContract(
        path=None, client=ledger, address=liq_token_contract_address
    )
 
    print("Pool (initial state): ")
    print(pair_contract.query({"pool": {}}), "\n")
 
    # Swap atestfet for CW20 tokens
    swap_amount = str(args.swap_amount)
    native_denom = "atestfet"
 
    tx = pair_contract.execute(
        {
            "swap": {
                "offer_asset": {
                    "info": {"native_token": {"denom": native_denom}},
                    "amount": swap_amount,
                }
            }
        },
        sender=wallet,
        funds=swap_amount + native_denom,
    )
 
    print(f"Swapping {swap_amount + native_denom} for CW20 Tokens...")
    tx.wait_to_complete()
 
    print("Pool (after swap): ")
    print(pair_contract.query({"pool": {}}), "\n")
 
    # To provide cw20 token to LP, increase your allowance first
    cw20_liquidity_amount = str(args.cw20_liquidity_amount)
    native_liquidity_amount = str(args.native_liquidity_amount)
 
    tx = token_contract.execute(
        {
            "increase_allowance": {
                "spender": pair_contract_address,
                "amount": cw20_liquidity_amount,
                "expires": {"never": {}},
            }
        },
        wallet,
    )
 
    print("Increasing Allowance...")
    tx.wait_to_complete()
 
    # Provide Liquidity
    # Liquidity should be added so that the slippage tolerance parameter isn't exceeded
 
    tx = pair_contract.execute(
        {
            "provide_liquidity": {
                "assets": [
                    {
                        "info": {"token": {"contract_addr": token_contract_address}},
                        "amount": cw20_liquidity_amount,
                    },
                    {
                        "info": {"native_token": {"denom": native_denom}},
                        "amount": native_liquidity_amount,
                    },
                ],
                "slippage_tolerance": "0.1",
            }
        },
        sender=wallet,
        funds=native_liquidity_amount + native_denom,
    )
 
    print(
        f"Providing {native_liquidity_amount + native_denom} and {cw20_liquidity_amount}CW20 tokens to Liquidity Pool..."
    )
    tx.wait_to_complete()
 
    print("Pool (after providing liquidity): ")
    print(pair_contract.query({"pool": {}}), "\n")
 
    # Withdraw Liquidity
    LP_token_balance = liq_token_contract.query(
        {"balance": {"address": str(wallet.address())}}
    )["balance"]
 
    withdraw_msg = '{"withdraw_liquidity": {}}'
    withdraw_msg_bytes = withdraw_msg.encode("ascii")
    withdraw_msg_base64 = base64.b64encode(withdraw_msg_bytes)
    msg = str(withdraw_msg_base64)[2:-1]
 
    tx = liq_token_contract.execute(
        {
            "send": {
                "contract": pair_contract_address,
                "amount": LP_token_balance,
                "msg": msg,
            }
        },
        sender=wallet,
    )
 
    print(f"Withdrawing {LP_token_balance} from pool's total share...")
    tx.wait_to_complete()
 
    print("Pool (after withdrawing liquidity): ")
    print(pair_contract.query({"pool": {}}), "\n")
 
 
if __name__ == "__main__":
    main()

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