AMM Designs: Understanding Automated Market Maker Models

When working with AMM designs, a set of mathematical formulas that determine how token prices adjust inside a liquidity pool. Also known as automated market maker models, they let traders swap assets without an order book, and they power most DeFi exchanges today.

Core Types of AMM Designs

The most famous example is the Constant Product AMM, which uses the formula x·y = k. Here x and y represent the reserves of two tokens, and k stays constant regardless of trade size. This simple curve guarantees that larger trades move the price more, creating natural slippage. Because of its predictability, Uniswap and many forks rely on this design.

Beyond the constant product, newer Hybrid AMM combines a stable‑coin‑friendly curve with a constant product segment. The hybrid approach lets low‑volatility pairs trade with minimal slippage while still supporting volatile assets. Projects like Curve and Balancer use hybrid or multi‑curve systems to attract both stable‑coin and crypto traders.

Another innovative family is the Dynamic Curve AMM, which adjusts its pricing curve based on market conditions or oracle inputs. Dynamic curves aim to reduce impermanent loss for liquidity providers and improve capital efficiency during periods of high volatility.

All these AMM designs depend on Liquidity Providers, the participants who deposit token pairs into the pool. Their rewards come from swap fees, but the exact risk‑/reward profile changes with each design. For instance, constant product pools expose providers to higher impermanent loss on volatile pairs, while hybrid pools mitigate that risk for stable‑coin pairs.

Understanding how each design shapes pricing, slippage, and liquidity risk is essential before you jump into any DeFi trade. Below you’ll find a curated selection of guides that break down formulas, compare real‑world implementations, and walk you through the math behind these models. Dive in to see how the theory translates into actual trading strategies.