How does an AMM set prices? Many people can’t explain it!
Uniswap V2 uses the x × y = k model: ignoring fees, the product of the quantities of the two tokens in the liquidity pool remains unchanged before and after a swap.
An AMM’s price is determined solely by the ratio of the quantities of the two tokens in the pool. When it diverges from the external market price, arbitrage trades bring the pool price back toward the external price.
Make sure you understand the principles before getting started. Don’t place orders based on gut feeling.
$UNI 7.158 (-2.93%)
For reference only. Make your own decisions.
Uniswap V2 uses the x × y = k model: ignoring fees, the product of the quantities of the two tokens in the liquidity pool remains unchanged before and after a swap.
An AMM’s price is determined solely by the ratio of the quantities of the two tokens in the pool. When it diverges from the external market price, arbitrage trades bring the pool price back toward the external price.
Make sure you understand the principles before getting started. Don’t place orders based on gut feeling.
$UNI 7.158 (-2.93%)
For reference only. Make your own decisions.