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  3. /Constant Product Formula
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defi

Constant Product Formula

The math equation x * y = k that most basic AMMs use to price trades.

Definition

The math equation x * y = k that most basic AMMs use to price trades. X and Y are the quantities of two tokens in a pool, and k is a constant. When you buy one token, the other's price goes up to keep k the same. Simple but effective.

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Related Terms

AMM (Automated Market Maker)

A type of decentralized exchange that uses math formulas instead of order books to price trades.

Liquidity Pool

A pool of tokens locked in a smart contract that enables decentralized trading.

DEX (Decentralized Exchange)

A cryptocurrency exchange that operates without a central authority, using smart contracts to facilitate trades.

1inch

A DEX aggregator that splits trades across multiple decentralized exchanges to find the best overall price.

Aave

One of the biggest lending and borrowing protocols in DeFi.

Across Protocol

A cross-chain bridge that uses an optimistic verification system and a network of relayers to move tokens between chains quickly.

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