This lesson covers decentralised finance (DeFi): financial services (trading, lending, earning yield) rebuilt out of smart contracts, with no bank or broker in the middle. The centrepiece is the automated market maker (AMM), the pricing mechanism that lets a decentralised exchange work without an order book. We build the AMM from intuition, then turn its constant-product rule into a full worked example covering price impact and impermanent loss, the two ideas that trip people up. We finish by separating yield farming from staking, which are constantly confused. The AMM math here carries directly into Module 2’s market-structure lesson.
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