How does a DEX set prices without placing orders?
One detail: LPs deposit a pair of tokens in the current ratio and earn a share of the trading fees.
AMM quotes are calculated solely from the ratio of the two tokens in the liquidity pool. When the price differs from that on other markets, arbitrage trades push the quote back toward the external price.
Remember this—it’s better than memorizing a bunch of jargon. Every yield comes with a corresponding risk, so think carefully about how much you could lose in the worst case.
$UNI is the governance token of Uniswap, which popularized AMMs.
One detail: LPs deposit a pair of tokens in the current ratio and earn a share of the trading fees.
AMM quotes are calculated solely from the ratio of the two tokens in the liquidity pool. When the price differs from that on other markets, arbitrage trades push the quote back toward the external price.
Remember this—it’s better than memorizing a bunch of jargon. Every yield comes with a corresponding risk, so think carefully about how much you could lose in the worst case.
$UNI is the governance token of Uniswap, which popularized AMMs.