Constant Product Formula

The constant product formula is a computational algorithm utilized to calculate the value of tokens on an automated market maker (AMM) platform. This formula ensures that the tokens held within a liquidity pool maintain a consistent relative value. The renowned formulation, first introduced by the Uniswap protocol, is expressed as x * y = k, signifying that the product of the quantities of tokens in a liquidity pool remains constant. This formula plays a crucial role in enabling the automatic determination of token prices based on their relative values.