// Hacker Noon · 21 May 2026

A Mathematical Breakdown of How Automated Market Makers Price Assets

AMMs use the formula x·y=k to price tokens without an order book. Swaps move reserves along a hyperbola, causing price impact on large trades. A 0.30% fee grows k over time, rewarding liquidity providers. LPs face impermanent loss — always worse than holding when price moves, calculated as IL(r) = 2...

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