How Uniswap Actually Works The x·y=k Formula Explained

Description

Most people think exchanges need order books and matching engines — Uniswap replaced all of that with a single equation: x · y = k. In this episode, I break down exactly how Uniswap's Automated Market Maker (AMM) works, how prices are set by math alone, and why this formula now powers billions in daily trading volume with zero human market makers. By the end of this video, you'll understand the constant product formula, how to calculate price impact before any trade, and why arbitrageurs — not admins — keep AMM prices accurate. 📌 CHAPTERS 0:00 — No order books: how Uniswap changed everything 0:30 — What is an Automated Market Maker (AMM)? 1:15 — The x·y=k constant product formula explained 2:25 — Numerical example: buying ETH from a liquidity pool 3:05 — AMM output formula + Uniswap's 0.3% fee mechanism 3:53 — Price impact: why trade size matters 4:32 — Arbitrage as the price correction mechanism 5:13— Uniswap V2 vs V3: concentrated liquidity explained 5:55 - Feet Tiers and Liquidity Provider Economics 06:24 — Action item + next episode: impermanent loss 🔢 WHAT WE COVER ✔ The constant product invariant: x · y = k — what it means and why it works ✔ How liquidity pools replace order books entirely ✔ AMM output formula: ✔ Price impact calculation — and why it scales non-linearly with trade size ✔ How arbitrageurs keep Uniswap prices aligned with global markets ✔ Uniswap V2 vs V3: uniform vs concentrated liquidity ✔ Fee tiers: 0.01%, 0.05%, 0.30%, 1.00% — which pairs use which and why 📚 TOPICS COVERED Uniswap explained · how AMMs work · constant product formula · automated market maker · DeFi for beginners · liquidity pool mechanics · price impact DeFi · Uniswap V2 vs V3 · concentrated liquidity · DEX aggregators · arbitrage DeFi · impermanent loss intro · decentralized exchange · quantitative DeFi 🔔 SUBSCRIBE for weekly quant finance breakdowns — new episodes every week covering the math behind professional trading, DeFi, portfolio construction, and financial engineering. This is Quantifaya — where the math is real and the edge is yours. #Uniswap #DeFi #AutomatedMarketMaker #ConstantProductFormula #LiquidityPool #UniswapV3 #CryptoTrading #QuantitativeFinance #DecentralizedExchange #Web3 #BlockchainFinance #ImpermanentLoss #DEX #FinancialEngineering