How Does a "Constant Sum Market Maker" (CSMM) Attempt to Minimize Slippage for Stablecoin Pairs? ▴ Learn

How Does a “Constant Sum Market Maker” (CSMM) Attempt to Minimize Slippage for Stablecoin Pairs?

A Constant Sum Market Maker (CSMM) uses the formula x + y = k, where the sum of the reserves remains constant. This model is ideal for assets that are expected to trade near a 1:1 ratio, such as stablecoins.

Because the curve is linear, it allows for large trades with minimal price impact (low slippage) as long as the reserves are relatively balanced. This is a significant improvement over the Constant Product model for highly correlated assets.

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