What Is the Difference between a Constant Product Market Maker and a Constant Sum Market Maker? ▴ Learn

What Is the Difference between a Constant Product Market Maker and a Constant Sum Market Maker?

A Constant Product Market Maker (CPMM) uses x y = k and is ideal for volatile assets, as it ensures liquidity across all prices but with high slippage at extremes. A Constant Sum Market Maker (CSMM) uses x + y = k and is ideal for assets expected to trade near a 1:1 ratio (like stablecoins), offering zero slippage near the 1:1 peg.

However, CSMM risks one reserve being fully depleted if the peg breaks.

Explain the Difference between a Constant Product Market Maker and a StableSwap Market Maker

What Are ‘Stableswaps’ and How Do They Modify the Constant Product Formula for Pegged Assets?

Explain the Difference between a Constant Product and a Stable-Swap AMM

What Is the Significance of the “Invariant” in Curve Finance’s StableSwap AMM?