A Constant Function Market Maker (CFMM) is a decentralized exchange algorithm that prices assets automatically using a mathematical formula, forming the backbone of most on-chain spot trading.
AGON is your arena for sports betting, not a general-purpose DEX. Our markets use a specialized engine built for binary outcomes. However, you will interact with CFMMs constantly in the broader ecosystem.
To bet on AGON, you need USDC collateral on Base. Most users get this by swapping ETH or other tokens on a DEX like Uniswap, which is powered by a CFMM. Understanding how these mechanisms work means you lose less to slippage when funding your account or cashing out winnings. Knowing the mechanics of the on-chain world is non-negotiable for any serious participant.
The original and simplest CFMM uses the constant product formula: x * y = k.
x = quantity of Asset A in the liquidity pool.y = quantity of Asset B in the liquidity pool.k = the constant product, a fixed value.This formula creates a pricing curve. When you trade, you add one asset to the pool and remove the other, but the product k must remain the same (before fees). As you buy more of asset X, its supply in the pool (x) decreases, making it progressively more expensive. The larger your trade relative to the pool's total liquidity, the more the price moves against you. This is slippage. If you try to ape into a shallow pool, slippage will eat your returns.
Trading prediction markets involves risk. Not financial advice.