DeFi Market Making Interview Guide
DeFi market making interview guide for AMMs, liquidity pools, pricing curves, fees, inventory, impermanent loss, and risk.
Candidates comparing decentralized liquidity with centralized market making mechanics.
DeFi market making often uses pools
Instead of continuously posting quotes in an order book, many DeFi venues use liquidity pools and pricing functions. The mechanics change inventory and execution risk.
Fees compensate but do not eliminate risk
Liquidity providers may earn fees, but face price movement, adverse selection, impermanent loss, smart-contract, and operational risks in a generic sense.
Concrete example
In a constant product pool, a buy trade changes reserves and moves the implied price. The larger the trade relative to pool depth, the larger the slippage.
Arbitrage links pool and external prices
External traders can move pool prices toward broader market prices, but gas costs, latency, and liquidity determine whether the adjustment is complete.
Common mistakes
Candidates often describe DeFi liquidity as passive yield. Interview-safe answers emphasize mechanics, fees, slippage, inventory, and risk.
Practice the pattern
Use the LeetQuidity curriculum and calibration to turn this topic into a focused practice plan.