x * y = k, states that trades must not change the product (
k) of a pair’s reserve balances (
kremains unchanged from the reference frame of a trade, it is often referred to as the invariant. This formula has the desirable property that larger trades (relative to reserves) execute at exponentially worse rates than smaller ones.
k. This functions as a payout to LPs, which is realized when they burn their pool tokens to withdraw their portion of total reserves. In the future, this fee may be reduced to 0.25%, with the remaining 0.05% withheld as a protocol-wide charge.