The pricing invariant x * y = k, where x and y are token reserves and k is a constant. When one token is bought, the other's reserve increases to maintain k. This formula is used by Uniswap V2 and most AMM forks.
AMM
Constant Product Formula
Related terms in AMM
Automated Market Maker (AMM)
A smart contract that holds token reserves and enables trading without an order book. Prices are determined al...
Liquidity Pool
A smart contract holding paired token reserves that enables trading. Liquidity providers deposit equal value o...
Liquidity Provider (LP)
A user who deposits tokens into a liquidity pool to facilitate trading, earning a share of trading fees in ret...
LP Token
A token minted to liquidity providers representing their share of a pool. LP tokens can be burned to withdraw ...