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Burning Liquidity: Exit, Profit, and How DeFi Began losing its mind

DEV Community·Adi·23 days ago
#puf92FU3
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Six posts in. The end is in sight. We've covered the AMM fundamentals, the architecture, mint, swap, and flash loans. Burn is the last of the four core flows, and honestly it's the most straightforward of the lot. The mechanics are clean, the math follows directly from everything we've already covered, and by the end of this post you'll have a complete picture of the liquidity lifecycle on Uniswap V2. But burn also opens a door to a story that's hard not to tell once you start. Because LP tokens aren't just receipts. They're assets. And what people did with that realisation in 2020 was, depending on your perspective, either the most creative financial engineering in the history of decentralised systems or a spectacular collective hallucination that somehow worked. Possibly both. We'll get to the mechanics first. The flow: removeLiquidity() When a liquidity provider wants their tokens back, they call removeLiquidity() on the Router.…

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