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All of tokens have decimals property, e.g. WBNB token has 18 decimals.

If there was a pair using different decimals, then we would first need to divide both sides before we calculate rates.

(token0 / pow(10, decimals0)) / (token1 / pow(10, decimals1))

What's the reason we need decimals as opposed to just having all tokens use the same base?

Is this is a limitation / optimization of ?

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What's the reason all tokens have decimals?

They don't have to use decimals.

According to the ERC-20 standard description for decimals:

"OPTIONAL - This method can be used to improve usability, but interfaces and other contracts MUST NOT expect these values to be present."

For ERC-721:

"...we find it contrived to require all ERC-721 implementations to support the decimals function."


18 decimals equates to the equivalent translation from ETH -> wei, which is why it's so popular.

Other values do exist in the wild, such as 6 decimal places for USDT and USDC. (See: Why fiat-backed stablecoins have a decimal of more than 2?)

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