TWAP Oracle + Fee Accumulation

TWAP Oracle + Fee Accumulation

What You Are Building

Your AMM's spot price can be manipulated within a single transaction (flash loans). A TWAP (Time-Weighted Average Price) oracle tracks cumulative prices over time, making manipulation expensive because the attacker would need to sustain the manipulated price across multiple blocks.

In this section, you will implement:

• Cumulative price tracking in _update()
• The protocol fee mechanism (optional 0.05% fee split)
• kLast tracking for fee calculation

How the TWAP Oracle Works

Every time reserves change, _update() accumulates the current price multiplied by time elapsed:

price0CumulativeLast += (reserve1 / reserve0) * timeElapsed
price1CumulativeLast += (reserve0 / reserve1) * timeElapsed

To read the average price over a period, an external contract snapshots price0CumulativeLast at two points in time and divides the difference by the time elapsed. This gives a price that is resistant to single-block manipulation.

Protocol Fee Mechanism

Uniswap V2 has a switch for a 0.05% protocol fee (1/6 of the 0.3% trading fee). When enabled, the protocol mints LP tokens to a feeTo address proportional to the growth in sqrt(k).

This is calculated in _mintFee():

rootK = sqrt(reserve0 * reserve1)
rootKLast = sqrt(kLast)
feeLP = totalSupply * (rootK - rootKLast) / (5 * rootK + rootKLast)

Your Task

Add cumulative price tracking to _update() and implement the _mintFee() function. The fee mechanism should be optional (only active when feeTo != address(0)).