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Understand the concepts behind token launches, AMM liquidity, and decentralized exchange mechanics.
Constant Product AMM
A constant product AMM is a decentralized exchange design where trades are priced by a simple rule: the product of two token reserves must stay constant (x * y = k). Instead of matching buyers with sellers, traders swap directly against a pool of tokens held in a smart contract. Uniswap v2-style pools are the most widely used implementation of this model.
Liquidity Pool
A liquidity pool is a smart contract holding reserves of two tokens that enables decentralized trading. Instead of matching buyers and sellers, traders swap against the pooled reserves, with prices determined by a mathematical formula. Liquidity providers deposit tokens into the pool and earn a share of trading fees in return.
Impermanent Loss
Impermanent loss is the difference in value between holding tokens in a liquidity pool versus simply holding them in your wallet. When the price ratio between pooled tokens changes, the AMM automatically rebalances your position — you end up with more of the cheaper token and less of the expensive one. It's called 'impermanent' because the loss reverses if prices return to their original ratio, but becomes permanent once you withdraw.
Slippage
Slippage is the difference between the price you expect for a trade and the price you actually receive when it executes. In DeFi, slippage comes from two sources: the price impact of your trade moving along the AMM curve, and price changes caused by other transactions executing before yours. Larger trades relative to liquidity experience more slippage.
Token Generation Event (TGE)
A Token Generation Event (TGE) is the moment a token is created and first becomes tradeable. For DEX launches, this means deploying the token contract, creating a liquidity pool, and seeding it with initial reserves — establishing the first market price through the pool's token ratio. Everything that happens in a token launch simulator models this moment and its immediate aftermath.
Market Cap vs FDV
Market cap is the current token price multiplied by the circulating supply — what the market values the tradeable tokens at right now. Fully diluted valuation (FDV) is the price multiplied by the total supply, including locked, vesting, and unreleased tokens. The gap between market cap and FDV reveals how much future sell pressure exists from tokens that haven't hit the market yet.
Liquidity
Pool liquidity is the total amount of capital held in a liquidity pool, measured in USD value. Deeper pools absorb larger trades with less price movement, while shallow pools cause significant price impact from even modest trades. For token launches, pool liquidity is directly controlled by the liquidity budget — the amount of capital the founder deposits into the initial pool.
Pool Depth
Pool depth is the total amount of capital held in a liquidity pool, measured in USD value. Deeper pools absorb larger trades with less price movement, while shallow pools cause significant price impact from even modest trades. For token launches, pool depth is directly controlled by the liquidity budget — the amount of capital the founder deposits into the initial pool.
Spot Price
Spot price in an AMM is the instantaneous price of one token in terms of another, derived from the current pool reserves. In a constant product AMM, the spot price equals the ratio of the two reserves (y/x). It represents the price for an infinitesimally small trade — actual trades of any meaningful size receive a worse average price due to price impact.
Price Impact
Price impact is the change in a token's pool price caused directly by your trade. In a constant product AMM, every trade shifts the reserve ratio, moving the price. The larger your trade relative to the pool's reserves, the greater the price impact. Unlike slippage (which includes external factors), price impact is deterministic — given the pool state and trade size, you can calculate it exactly.
TGE Capital Allocation
TGE Capital Allocation is the total budget a founder commits to their token launch, split between two purposes: liquidity provision (L) — the capital deposited into the DEX pool to enable trading — and token acquisition (P) — the capital used to buy the founder's own token from the pool. How you split this budget determines liquidity, initial price, supply ownership, and the trade quality your community experiences.
Supply Ownership
Supply ownership is the percentage of total token supply that a founder or team controls after the initial purchase at launch. In a DEX launch using a constant product AMM, the founder buys tokens from their own pool using the acquisition portion of the budget. The number of tokens received — and therefore the ownership percentage — depends on the pool size, the buy amount, and the AMM formula.
Liquidity Provider (LP)
A liquidity provider (LP) is anyone who deposits tokens into a DEX liquidity pool to enable trading. In return, they earn a share of the trading fees from every swap. During a token launch, the founder acts as the initial LP by depositing the liquidity portion of their budget alongside their token into the pool — this is what creates the market.
Total Supply
Total supply is the maximum number of tokens that will ever exist for a given cryptocurrency. It affects the per-token price (more tokens = lower price per token) but not the market cap, which is determined by the total value in the pool. Choosing between 1 million and 1 billion tokens is a UX decision, not an economic one — the math works the same either way.
Monte Carlo Simulation
A Monte Carlo simulation models uncertainty by running many random scenarios to see the range of possible outcomes. Instead of predicting a single price path, it generates hundreds or thousands of possible futures — each with random trade sizes, directions, and timing — to show the probability distribution of outcomes like market cap, price, and pool state after launch.
Constant Product Formula
The constant product formula (x * y = k) is the core mathematical rule behind most decentralized exchange pools. It states that the product of the two token reserves must remain constant during any trade. When a trader adds one token to the pool, the formula determines exactly how many of the other token they receive — ensuring the product stays at k (before fees).
Liquidity-to-Acquisition Ratio
The liquidity-to-acquisition ratio is how you divide your token launch budget between pool liquidity (creating a tradeable market) and buying your own token (acquiring supply ownership). A 70/30 ratio means 70% of the budget goes to pool liquidity and 30% goes to buying tokens. This single slider is the most consequential parameter in a token launch — it controls the tradeoff between liquidity and founder ownership.
DEX Launch
A DEX launch is the process of making a token tradeable by creating a liquidity pool on a decentralized exchange. The founder deploys the token contract, deposits tokens and a base asset (like ETH or USDC) into a DEX pool, and opens trading to the public. Unlike centralized exchange listings, DEX launches require no permission — anyone can create a pool, but the founder must provide the initial liquidity.
Backwards Calculator
A backwards calculator reverses the typical token launch planning process. Instead of starting with a budget and seeing what market cap results, you start with a target market cap and target supply ownership, and the calculator works backwards to tell you exactly how much liquidity and acquisition budget you need. This turns vague goals into concrete capital requirements.
Anti-Sniper Strategy
MEV bots watch mempools for new pool creation events and immediately buy tokens at or near the initial pool price, then sell into organic buyers for a profit. Founders can defend against this by targeting high supply ownership (70-90%+), which pushes the price up before snipers can exit profitably and leaves less cheap float available. The tradeoff is a thinner pool and centralisation optics. Contract-level protections offer an alternative or complementary approach.
Constant Product
Constant product is the core rule behind most DEX liquidity pools. It says that the product of the two token reserves (x * y) must stay constant during any trade. This single rule automatically prices every trade, adjusts the price as trades happen, and ensures the pool can never be fully drained. Uniswap v2 and the vast majority of DEX pools on Ethereum, Solana, and Base all use this model.