Constant Reserve Rate (CRR)

The Constant Reserve Rate (CRR) in crypto refers to the percentage of assets that a decentralized exchange (DEX) or a similar platform must hold in reserve to facilitate liquidity provision and ensure stability within the platform's ecosystem. CRR is a key parameter in automated market maker (AMM) algorithms, such as those used in platforms like Uniswap and SushiSwap.

For example, let's say a DEX has a CRR of 20%. This means that for every trade executed on the platform, 20% of the value of the traded assets must be held in reserve by the platform.

Case 1: Consider a user swapping 1 Ethereum (ETH) for 200 USDC on a DEX with a CRR of 20%. The DEX would need to hold 40 USDC (20% of 200 USDC) in reserve to facilitate this trade.

Case 2: Now, if another user wants to swap 100 USDC for Ethereum on the same DEX, the DEX would need to have enough Ethereum in reserve to fulfill this trade. If the DEX's Ethereum reserves are low, it may not be able to execute the trade until more Ethereum is added to the reserves.

In summary, the Constant Reserve Rate (CRR) is a crucial parameter that helps maintain liquidity and stability in decentralized exchanges by ensuring there are sufficient reserves to facilitate trades.