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.
Read more about XY liquidity model.