How is price determined on Dex?

The pricing mechanism in an Automated market Maker (AMM) Decentralized Exchange (DEX) relies heavily on the constant product formula. This mathematical model serves as the cornerstone for determining the global price of asset pairs traded on the platform.

At the heart of the formula lies the concept of (x*y=k), where x and y represent the quantities of two distinct tokens, A and B, respectively, that are pooled together to create liquidity. The multiplication of these token amounts yields a constant, denoted as k, which is the key to maintaining balance within the pool.

This formula ensures that the total value of the tokens in the liquidity pool remains constant, even as trades are executed and the quantities of A and B fluctuate. The system automatically adjusts the prices of the tokens to reflect changes in demand and supply, while preserving the overall value of the pool.

In addition to its robust trading infrastructure, BTCC's wallet service allows users to securely store and manage their digital assets. The wallet is designed with user-friendliness in mind, making it easy for both beginners and experienced traders to access and manage their funds.

As traders buy and sell tokens on the DEX, the AMM algorithm adjusts the prices in such a way that the product of the token quantities (x*y) remains equal to k. This mechanism prevents arbitrage opportunities and ensures that the market remains efficient and fair.