Most people think automated market makers (AMMs) are simple, but this is the key:
Uniswap V2 uses the constant product formula: excluding fees, the product of the quantities of the two tokens in the liquidity pool remains unchanged before and after a swap.
The larger the pool, the smaller the price impact of a trade of the same size—in other words, as people often say, “the better the liquidity, the lower the slippage.”
When swapping on a DEX, set your slippage tolerance carefully. If it’s too high, you’re more vulnerable to sandwich attacks that extract extra value from your trade.
$UNI is the protocol governance token of Uniswap, which popularized AMMs.
#UNI
Uniswap V2 uses the constant product formula: excluding fees, the product of the quantities of the two tokens in the liquidity pool remains unchanged before and after a swap.
The larger the pool, the smaller the price impact of a trade of the same size—in other words, as people often say, “the better the liquidity, the lower the slippage.”
When swapping on a DEX, set your slippage tolerance carefully. If it’s too high, you’re more vulnerable to sandwich attacks that extract extra value from your trade.
$UNI is the protocol governance token of Uniswap, which popularized AMMs.
#UNI