This is where the training wheels come off. No warm-up, no “guess before you read,” no friendly nudge in the margin — just the course asking whether any of it actually stuck. The five lessons handed you everything: why a pool beats an order book, the x·y=k invariant, how liquidity and LP tokens work, where slippage and price impact come from, and the quiet arithmetic of impermanent loss. Read every option twice. The trap is almost always the one that sounds 90% right.
How this exam works
This is a graded exam. Questions come one at a time. Once you submit an answer it is final — there is no going back, no second try, and a wrong answer simply fails that question. Your score stays hidden until the end, where you need 70% to pass. Read every option twice before you commit.
In an order book exchange your trade is matched against another trader. In an AMM, what do you trade against instead?
Select an answer to continue.
Course Recap
If you cleared 70%, you can now read an AMM like a mechanic reads an engine: where the price comes from, who funds it, why big trades hurt, and exactly how an LP can be up in dollars yet behind a simple hold. That’s real fluency in the plumbing that quietly settles billions in on-chain trades.
Big picture
The whole AMM in one map
- Automated market makers, end to end
- Why AMMs
- Trade against a pool, not a person
- Liquidity providers fund the reserves
- Arbitrage keeps the price honest
- Win: permissionless & always-on; cost: slippage + IL
- Constant product x·y=k
- Invariant: product of reserves stays k
- Spot price = y ÷ x
- A swap walks the hyperbola; pool never empties
- 0.3% fee stays in, grows k, pays LPs
- Liquidity providers & LP tokens
- Deposit BOTH tokens in ratio
- LP tokens = receipt & claim on the pool
- Share = your deposit ÷ pool value; fees pro-rata
- More LPs dilute share; withdraw current reserves
- Slippage & price impact
- Spot vs execution (average) price
- Price impact: your trade, deterministic
- Slippage: quote-vs-fill change between submit & confirm
- Depth cuts impact; sandwich/MEV bots
- Impermanent loss
- Arbitrage rebalances → LP behind HODL
- IL(r) = 2√r ÷ (1+r) − 1; symmetric in r vs 1/r
- Impermanent until withdrawal; fees offset it
- Opportunity cost vs HODL — can still be up in dollars
- Why AMMs
That’s the AMM, start to finish. The pool, the curve, the LP, the slippage, and the loss that isn’t quite a loss — you can now reason about each one from first principles, which is exactly what it takes to provide liquidity or trade on-chain without getting quietly fleeced.