Individual skill
lp-math
AMM liquidity provision mathematics including constant-product, concentrated liquidity, price impact, and LP share calculations
skills/lp-math/SKILL.md
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# LP Math — AMM Liquidity Provision Mathematics
Automated Market Makers (AMMs) replace traditional orderbooks with liquidity pools. Instead of matching buyers and sellers, a mathematical formula determines prices based on reserve ratios. Liquidity providers (LPs) deposit both assets into a pool and earn fees from every trade.
Understanding the math behind AMMs is essential for:
- Evaluating whether providing liquidity is profitable after impermanent loss
- Estimating price impact before executing large trades
- Comparing capital efficiency across pool types (constant product vs concentrated)
- Calculating expected fee revenue for a given pool position
**Related skills**: See `impermanent-loss` for IL calculations, `yield-analysis` for LP yield modeling, `liquidity-analysis` for pool depth assessment.
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