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Read a quote through the reserves
Useful first : Liquidity pools and automated market makers
Reading path · 38 / 41 · Intermediate
A swap does not need a person posting the opposite order.
A pool is not an order book
A swap does not need a person posting the opposite order. Uniswap uses pools of assets and rules that determine the exchange as the pool changes. The protocol, a website that accesses it, a liquidity position and the UNI token are four different things. UNI is a governance token; it is not the receipt for your share of a pool.
Where the price comes from
In a simple constant-product pool, buying one asset removes it from the reserve while adding the other. The resulting price changes with the trade. Versions 3 and 4 let liquidity providers choose price ranges, so liquidity available near the current price matters more than a single headline pool balance. A position can become inactive when the price moves outside its range.
Price impact and slippage
Price impact describes the effect of your own trade on a pool. Slippage describes a difference between the quoted and executed result, which may also reflect other activity before inclusion. A minimum-output setting limits the acceptable execution result; it does not remove risk or make the quote a promise.
What UNI actually does
UNI voting power can be delegated. The current token documentation also describes protocol fees used to burn UNI. Neither mechanism gives each holder a proportional withdrawal right over liquidity reserves. Pool fees, protocol fees, network fees and the price of UNI belong to separate calculations. Start by naming the role you are studying: trader, liquidity provider or governance participant.
Understand the details
Use a deliberately simplified constant-product pool: x × y = k. With 1,000 units of A and 1,000 of B, k is 1,000,000. Adding 100 A gives x = 1,100, so y must become 909.09 B; the output is about 90.91 B. The starting reserve ratio is not a fixed rate for the entire trade. This calculation isolates price impact; real swaps also involve fees, routing and changing market conditions.
Boundaries and common mistakes
This is a no-fee, single-pool model, not a current quote or a full representation of concentrated liquidity. A trade can execute exactly as quoted and still have price impact.
The mechanism at a glance
- 011,000 A · 1,000 B
- 02Add 100 A
- 03Keep x × y constant
- 04Receive about 90.91 B
Read these as connected concepts, not necessarily consecutive steps.
Without fees: the pool moves from 1,000 A and 1,000 B to 1,100 A and about 909.09 B. The product stays 1,000,000; about 90.91 B go to the user.
Read the explanation
Use a deliberately simplified constant-product pool: x × y = k. With 1,000 units of A and 1,000 of B, k is 1,000,000. Adding 100 A gives x = 1,100, so y must become 909.09 B; the output is about 90.91 B. The starting reserve ratio is not a fixed rate for the entire trade. This calculation isolates price impact; real swaps also involve fees, routing and changing market conditions.
Put the mechanism into context
The fictional pool starts with 1,000 A and 1,000 B. Another learner expects 100 B in exchange for 100 A because the initial ratio is one to one. Apply the reserve rule before deciding.
Apply it in the workshop →What this mechanism does not guarantee
This is a no-fee, single-pool model, not a current quote or a full representation of concentrated liquidity. A trade can execute exactly as quoted and still have price impact.
The distinction that changes the analysis
In the fictional no-fee pool, adding 100 A changes the reserve ratio and returns about 90.91 B. This impact is present even if the trade executes exactly as quoted. A later change between quote and execution is a separate issue.
Explain it yourself
Revisit the case above. Name what is established, what remains to be checked and the evidence needed to conclude. A strong answer addresses both sides of the diagram.
Apply the lesson to a case
The fictional pool starts with 1,000 A and 1,000 B. Another learner expects 100 B in exchange for 100 A because the initial ratio is one to one. Apply the reserve rule before deciding.
90.91 B. The new B reserve is 1,000,000 ÷ 1,100 ≈ 909.09. Subtract it from 1,000. The shortfall against 100 B comes from the changing reserve ratio, even though this example charges no fee.
Prepare a correction note
Describe the passage and the proposed correction. This creates a local note for you to share; it sends nothing. Do not include personal or confidential information.