Constant Product Formula vs Price Impact

Quick comparison to help you distinguish these two crypto terms.

Constant Product Formula
intermediate
fundamentals

The constant product formula is the mathematical rule used by most AMMs to price tokens, maintaining the product of two pool token quantities as a fixed constant across every trade.

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Price Impact
intermediate
market_structure

Price impact is the percentage change in a token's exchange rate caused by a specific trade, resulting from the shift in pool token ratios produced by the transaction.

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