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Cryptocurrency News Articles
Earn $GEMS by Answering Xenea Wallet's Daily Quiz
May 12, 2025 at 09:46 pm
Xenea Wallet has quickly become a favorite platform for cryptocurrency enthusiasts eager to earn rewards through various in-app activities.
Good morning everyone and welcome back to another installment of Daily Quiz answers for Xenea Wallet. Today's question is: Which mechanism sets prices in automated market makers? The options are A) Constant Sum, B) Constant Rate, C) Linear, and D) Constant Product.
The correct answer is D) Constant Product.
The term "automated market maker" (AMM) refers to a decentralized exchange (DEX) that uses a liquidity pool to set prices for various assets directly on the exchange, without the need for an intermediary such as a bank or brokerage firm.
In contrast to centralized exchanges (CEXs), which typically use an order book to match buyers and sellers, AMMs rely on a liquidity pool funded by users who deposit equal amounts of two assets, such as ETH and USDC, into a smart contract. This liquidity is then used by traders to execute their trades.
The prices on AMMs are determined by a formula that is applied to the tokens in the liquidity pool. One common formula is Constant Product, which states that the product of the two assets in the pool remains constant. For example, if the pool starts with 10 ETH and 100 USDC, then the product is 1,000. If a user wants to buy 1 ETH, they will need to pay USDC at a rate that keeps the product of ETH and USDC equal to 1,000.
Now, let's break down why the other options are incorrect.
Option A) Constant Sum is not used to set prices in AMMs. In fact, the liquidity in the pool is constantly changing as users add and remove funds.
Option B) Constant Rate would imply that the price of one asset remains fixed, while the price of the other asset changes accordingly. However, in AMMs, prices are determined by supply and demand, and both prices will change based on user trades.
Option C) Linear pricing would involve a simple linear equation to set prices, but this is not the mechanism used by AMMs.
Therefore, the only correct option is D) Constant Product. This formula is used to set prices in AMMs, and it ensures that the total value locked (TVL) in the liquidity pool remains constant.
As a tip for maximizing $GEMS earnings, referring friends to Xenea Wallet can be a great way to boost your chances of earning more rewards. The more users you refer, the higher the chances of earning $GEMS. So, spread the word about Xenea Wallet and start referring your friends today!
Disclaimer:info@kdj.com
The information provided is not trading advice. kdj.com does not assume any responsibility for any investments made based on the information provided in this article. Cryptocurrencies are highly volatile and it is highly recommended that you invest with caution after thorough research!
If you believe that the content used on this website infringes your copyright, please contact us immediately (info@kdj.com) and we will delete it promptly.
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