What Is XY liquidity model?
XY liquidity model, as known as XYK, is a bonding curve model where the price of an asset follows the equation:
\(x*y=k_{market\_maker}\)
This model was popularised by Uniswap version 2 decentralised exchange.
Anyone can buy or sell coins by essentially shifting the market maker’s, also known as a liquidity provider, position on the x*y=k curve.
On Trading Strategy, the available liquidity is usually expressed as the US dollar amount of one side of the pair. For example adding 100 BNB + 5000 USD to the liquidity is presented as 5000 USD available liquidity.
See also price impact and slippage.
Read more about slippage and price impact on Paradigm’s post.