ℹ️Introduction to Papyrus

Papyrus is an automated liquidity protocol implemented in a system of non-upgradeable smart contracts on Scroll Mainnet.

Anyone can become a liquidity provider (LP) for a pool by depositing an equivalent value of each underlying token in return for pool tokens. These tokens track pro-rata LP shares of the total reserves, and can be redeemed for the underlying assets at any time.

Pairs act as automated market makers, standing ready to accept one token for the other as long as the “constant product” formula is preserved. This formula, most simply expressed as x * y = k, states that trades must not change the product (k) of a pair’s reserve balances (x and y). Because k remains unchanged from the reference frame of a trade, it is often referred to as the invariant. This formula has the desirable property that larger trades (relative to reserves) execute at exponentially worse rates than smaller ones.

In practice, Papyrus applies a 0.10% fee to trades, which is added to reserves. As a result, each trade actually increases k.

Because the relative price of the two pair assets can only be changed through trading, divergences between the PapyrusSwap price and external prices create arbitrage opportunities. This mechanism ensures that PapyrusSwap prices always trend toward the market-clearing price.