Is the ‘K’ Value a Constant That Is Maintained Forever, or Does It Change?
The 'k' value in the x y=k formula is generally not a constant that is maintained forever. While it remains constant during a single trade, it increases over time as liquidity providers earn trading fees, which are added back into the pool's reserves.
When a new liquidity provider deposits capital or an existing one withdraws, the 'k' value also changes. It is a measure of the pool's total value locked at any given moment.
Glossar
X Y=k Formula
Definition ⎊ The X Y=k formula, known as the constant product market maker formula, defines the relationship between two assets in a liquidity pool.
Liquidity Providers
Capital ⎊ These entities supply the necessary assets to decentralized exchanges or automated market makers to facilitate continuous trading in crypto derivatives and options.
Total Value Locked
Collateralization ⎊ Total Value Locked, within decentralized finance, represents the aggregate value of crypto assets deposited in smart contracts, functioning as collateral for various protocols.