https://wiki.seasonaltokens.org/index.php?action=history&feed=atom&title=Tutorials%3AAutomated_Market_MakingTutorials:Automated Market Making - Revision history2026-04-29T16:46:19ZRevision history for this page on the wikiMediaWiki 1.38.1https://wiki.seasonaltokens.org/index.php?title=Tutorials:Automated_Market_Making&diff=5134&oldid=prevMediawiki at 18:48, 8 December 20252025-12-08T18:48:08Z<p></p>
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</td></tr></table>Mediawikihttps://wiki.seasonaltokens.org/index.php?title=Tutorials:Automated_Market_Making&diff=1446&oldid=prevBeginnersGuide>Marin: /* Example: */2024-12-30T23:12:41Z<p><span dir="auto"><span class="autocomment">Example:</span></span></p>
<p><b>New page</b></p><div>= Quest: Automated Market Making =<br />
<br />
Liquidity Pools are used to implement decentralized, automated, and trust-less markets. <br />
<br />
* These work differently from traditional order-book-based exchanges, where buyers and sellers place orders, and the exchange matches them. <br />
* In a decentralized exchange, a person trades with the liquidity pool, not directly with another person. <br />
<br />
== Key Concepts ==<br />
<br />
* Buying or selling a token in a decentralized exchange affects the price of the token. <br />
* The price is calculated after the impact of your trade is taken into account. <br />
* To calculate the price Uniswap uses the Constant Product Formula.<br />
<br />
== Formula for Token Price ==<br />
<br />
Let’s assume a liquidity pool contains: <br />
<br />
* '''T''' amount of tokens <br />
* '''E''' amount of Ether <br />
<br />
The price of a token in units of Ether is given by: <br />
<br />
'''P = E / T''' <br />
<br />
* Buyers:<br />
- Take tokens and deposit Ether, increasing the price. <br />
<br />
* Sellers:<br />
- Deposit tokens and take Ether, decreasing the price. <br />
<br />
== Price Determination ==<br />
<br />
Prices are determined by maintaining the condition: <br />
<br />
'''T * E = k''' <br />
<br />
Where '''k''' is a constant.<br />
<br />
'''Why this condition?'''<br />
<br />
# The formula is simple and requires no active management. <br />
# It ensures the liquidity pool can never be completely drained of either asset. <br />
# Prices are sensitive to trade size: Larger trades have a more significant impact on the price. <br />
<br />
This encourages smaller, frequent trades and discourages large market-moving trades.<br />
<br />
== '''Key Insights:''' ==<br />
<br />
* When you buy:<br />
<br />
- You don’t get the listed price but a higher price calculated after your Ether is deposited, and tokens are taken. <br />
- The more you want to buy, the more expensive it gets. <br />
<br />
* When you sell:<br />
<br />
- You don’t get the listed price but a lower price calculated after your tokens are deposited, and Ether is taken. <br />
- The more you sell, the cheaper it gets.<br />
<br />
<br />
== Example: ==<br />
<br />
An example will be better for understanding how this works. <br />
<br />
[[AMM Example | Automated Market Making Example ]]</div>BeginnersGuide>Marin