Constant Product AMM Interview Guide
Constant product AMM interview guide for x*y=k intuition, reserves, price impact, fees, arbitrage, examples, and limitations.
Candidates preparing for AMM math and digital-asset market structure questions.
The invariant links reserves
A constant product AMM keeps the product of two reserves constant before fees in the simplified model. Trades move reserves and therefore move the marginal price.
Price impact is nonlinear
As a trade consumes one side of the pool, each additional unit becomes more expensive. This is why trade size relative to liquidity matters.
Concrete example
If a pool has equal-value reserves and a trader buys a large amount of one token, the pool becomes imbalanced and the buyer receives a worse average price than the starting quote.
Fees and real designs add detail
Fees, concentrated liquidity, routing, and protocol-specific rules can change the simple formula. Use x*y=k as a baseline, not a universal description.
Common mistakes
Candidates often compute with the invariant but forget slippage, fees, or arbitrage. A complete answer connects the formula to execution and risk.
Practice the pattern
Use the LeetQuidity curriculum and calibration to turn this topic into a focused practice plan.