Swaps

About Swaps

Decentralized Exchanges (DEXs) and Automated Market Makers (AMMs)

DEXs are made of components (Liquidity Pools, LPs, and AMMs). A swap is done when liquidity is transferred from the LP to a trader. These can lead to losses in the LP due to inefficiencies in trade.

Losses

When the DEX is inefficient, the liquidity providers have impermanent loss as the rebalancing in the LP happens. Traders have losses due to price movements in the AMMs. These problems can be solved by dynamic AMMs.