Pool model

The Auto Market Maker (AMM) is the core of pool models and liquidity pools, instead of using the Oracle price, AMMs determine the prices by the algorithm.

Pools are defined as assets that have no direct correlation in price, examples are Bitcoin (BTC) and Ethereum (ETH). The price of ETH has no relation to the price of BTC.

The Pool is built for general-purpose tradings and utilizes the constant product algorithm:

and popularized by Uniswap V2 as:

The constant, represented by “k” means there is a constant balance of assets that determines the price of tokens in a liquidity pool.