Asked: How does an AMM price tokens?
My answer: An AMM doesn’t need to match buyers and sellers one trade at a time. Users trade against the two tokens in a liquidity pool. The larger the pool, the smaller the price impact of swapping the same amount—in other words, as people often say, “the deeper the liquidity, the lower the cost.”
$UNI 7.002（+2.64%）
Have you run into any pitfalls with this? Share them to help others avoid them.
#UNI
My answer: An AMM doesn’t need to match buyers and sellers one trade at a time. Users trade against the two tokens in a liquidity pool. The larger the pool, the smaller the price impact of swapping the same amount—in other words, as people often say, “the deeper the liquidity, the lower the cost.”
$UNI 7.002（+2.64%）
Have you run into any pitfalls with this? Share them to help others avoid them.
#UNI