> For the complete documentation index, see [llms.txt](https://docs.aqua.network/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.aqua.network/amm-and-pools/system-limitations/aquarius-amm-limitations-in-support-for-fee-on-transfer-rebasing-and-deflationary-tokens.md).

# Aquarius AMM: Limitations in Support for Fee-on-Transfer, Rebasing, and Deflationary Tokens

#### **1. Introduction**

The **Aquarius Automated Market Maker (AMM)** on the **Stellar network** currently supports only **standard SEP-41 compliant tokens**, which maintain a **fixed supply** and **predictable transfer behavior**. Certain **non-standard tokens**, such as **fee-on-transfer, rebasing, and deflationary tokens**, are **not supported** due to their incompatibility with the AMM’s **internal accounting and liquidity management systems**.

#### **2. Unsupported Token Types**

The following token types are **not supported** by **Aquarius AMM** due to their disruptive behaviors, which can lead to **protocol vulnerabilities** and **accounting inconsistencies**.

**2.1 Fee-on-Transfer Tokens**

**Definition:** These tokens automatically deduct a **fee on each transfer**, meaning the recipient **receives less than the amount sent**.

**Why They Are Unsupported:**

* **Aquarius AMM’s balance tracking** assumes that the **entire transferred amount is received**.
* The deducted **fee creates a mismatch** between recorded and actual balances.
* This results in **inaccurate pool accounting** and **potential financial inconsistencies**.

**2.2 Rebasing Tokens**

**Definition:** Rebasing tokens periodically **adjust their total supply**, either increasing or decreasing balances for all holders based on preset conditions.

**Why They Are Unsupported:**

* The AMM expects token balances to **remain stable** unless explicitly adjusted by user actions.
* Rebasing introduces **unexpected balance changes**, leading to **pricing errors** and **liquidity imbalances**.

**2.3 Deflationary Tokens**

**Definition:** Deflationary tokens **burn a portion of each transfer**, gradually reducing the total supply over time.

**Why They Are Unsupported:**

* Similar to **fee-on-transfer tokens**, the **received amount differs from the sent amount**.
* This disrupts the AMM’s **balance calculations**, causing **inaccurate pricing** and **pool valuation errors**.

#### **3. Impact of Adding Unsupported Tokens**

Adding **fee-on-transfer, rebasing, or deflationary tokens** to **Aquarius liquidity pools** can cause **significant operational and financial issues**, including:

* **Imbalanced Pool Accounting:** The AMM may fail to **accurately track** token balances, resulting in **pricing errors** and **liquidity mismanagement**.
* **Increased Exploitation Risk:** Discrepancies create **arbitrage opportunities**, where users can **manipulate pool imbalances** for unfair gains, potentially harming liquidity providers (**LPs**).
* **Financial Loss for LPs:** Liquidity providers may suffer **reduced returns** due to **inefficient liquidity allocation** and **inaccurate token pricing**.

By ensuring that only **compatible tokens** are used, Aquarius maintains **accurate accounting, fair liquidity management, and a secure trading environment**.


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