Constant Product Formula

On an automated market maker (AMM) platform, a constant product formula is an algorithm that determines the price of tokens. The formula requires that tokens in a liquidity pool maintain a constant relative value. The most well-known formula is x * y = k, which was developed by the Uniswap protocol and states that a pair of tokens in a liquidity pool must have equal total values. The formula can automatically determine pricing by fixing the relative value of the tokens.