Part 1: A brief overview of 1st generation AMMs

Prices of assets in the pool are algorithmically determined using the Automated Market Maker (AMM) algorithm. AMM works by maintaining a Constant Product based on the amount of liquidity on both sides of the pool. Let’s continue the ETH-DAI liquidity pool example, using 100 ETH and 20,000 DAI. To calculate the Constant Product, Uniswap will multipl

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On the other hand, liquidity pool DEXs such as Uniswap and Balancer lets users become the market makers by providing liquidity to a pair or pool of assets. Users deposit their assets and become liquidity providers, earning a small fee for each swap transaction performed for that particular pool. However, the mechanisms behind these types of DEXs, w

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